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# Correlation - PowerPoint PPT Presentation

Correlation. (Click icon for audio). Correlation Coefficient. Statistical measure of the co-variation or association between two variables The correlation coefficient for two variables, X and Y is:

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Presentation Transcript

(Click icon for audio)

Dr. Michael R. Hyman, NMSU

• Statistical measure of the co-variation or association between two variables

• The correlation coefficient for two variables, X and Y is:

• Sample question to test for statistical and managerial significance: Are dollar sales associated with advertising dollar expenditures?

• Rooster’s crow and the rising of the sun

• Rooster does not cause the sun to rise.

• Teachers’ salaries and liquor consumption

• Co-vary because both are influenced by a third variable (e.g., state of economy)

Examples: High correlations without causation

• r ranges from +1 to -1

• r = +1: a perfect positive linear relationship

• r = -1: a perfect negative linear relationship

• r = 0: no correlation

= Variance of Y

= Covariance of X and Y

Simple Correlation Coefficient

Standard form for reporting correlation results