CHAPTER 6 : CORRELATION - REGRESSION

6.1 Introduction
So far we have considered only univariate distributions. By the averages, dispersion and
skewness of distribution, we get a complete idea about the structure of the distribution. Many a
time, we come across problems which involve two or more variables. If we carefully study the
figures of rain fall and production of paddy, figures of accidents and motor cars in a city, of
demand and supply of a commodity, of sales and profit, we may find that there is some
relationship between the two variables. On the other hand, if we compare the figures of rainfall
in America and the production of cars in Japan, we may find that there is no relationship between
the two variables. If there is any relation between two variables i.e. when one variable changes
the other also changes in the same or in the opposite direction, we say that the two variables are
correlated.
W. J. King : If it is proved that in a large number of instances two variables, tend always to
fluctuate in the same or in the opposite direction then it is established that a relationship exists
between the variables. This is called a "Correlation."
6.2 Correlation
It means the study of existence, magnitude and direction of the relation between two or more
variables. in technology and in statistics. Correlation is very important. The famous astronomist
Bravais, Prof. Sir Fancis Galton, Karl Pearson (who used this concept in Biology and in
Genetics). Prof. Neiswanger and so many others have contributed to this great subject.
6.3 Types of Correlation
1. Positive and negative correlation
2. Linear and non-linear correlation
A) If two variables change in the same direction (i.e. if one increases the other also increases, or
if one decreases, the other also decreases), then this is called a positive correlation. For example :
Advertising and sales.
B) If two variables change in the opposite direction ( i.e. if one increases, the other decreases and
vice versa), then the correlation is called a negative correlation. For example : T.V. registrations
and cinema attendance.
1. The nature of the graph gives us the idea of the linear type of correlation between two
variables. If the graph is in a straight line, the correlation is called a "linear correlation"
and if the graph is not in a straight line, the correlation is non-linear or curvi-linear.
For example, if variable x changes by a constant quantity, say 20 then y also changes by a
constant quantity, say 4. The ratio between the two always remains the same (1/5 in this case). In
case of a curvi-linear correlation this ratio does not remain constant.

6.4 Degrees of Correlation
Through the coefficient of correlation, we can measure the degree or extent of the correlation
between two variables. On the basis of the coefficient of correlation we can also determine
whether the correlation is positive or negative and also its degree or extent.
1. Perfect correlation: If two variables changes in the same direction and in the same
proportion, the correlation between the two is perfect positive. According to Karl
Pearson the coefficient of correlation in this case is +1. On the other hand if the variables
change in the opposite direction and in the same proportion, the correlation is perfect
negative. its coefficient of correlation is -1. In practice we rarely come across these types
of correlations.
2. Absence of correlation: If two series of two variables exhibit no relations between them
or change in variable does not lead to a change in the other variable, then we can firmly
say that there is no correlation or absurd correlation between the two variables. In such
a case the coefficient of correlation is 0.

3. Limited degrees of correlation: If two variables are not perfectly correlated or is there a
perfect absence of correlation, then we term the correlation as Limited correlation. It may
be positive, negative or zero but lies with the limits 1.


High degree, moderate degree or low degree are the three categories of this kind of correlation.
The following table reveals the effect ( or degree ) of coefficient or correlation.
Degrees Positive Negative
Absence of correlation Zero 0
Perfect correlation + 1 -1
High degree + 0.75 to +
1
- 0.75 to -1
Moderate degree + 0.25 to +
0.75
- 0.25 to -
0.75
Low degree 0 to 0.25 0 to - 0.25

6.5 Methods Of Determining Correlation
We shall consider the following most commonly used methods.(1) Scatter Plot (2) Kar Pearsons
coefficient of correlation (3) Spearmans Rank-correlation coefficient.
1) Scatter Plot ( Scatter diagram or dot diagram ): In this method the values of the two
variables are plotted on a graph paper. One is taken along the horizontal ( (x-axis) and the other
along the vertical (y-axis). By plotting the data, we get points (dots) on the graph which are
generally scattered and hence the name Scatter Plot.
The manner in which these points are scattered, suggest the degree and the direction of
correlation. The degree of correlation is denoted by r and its direction is given by the signs
positive and negative.


i) If all points lie on a rising straight line the correlation is perfectly positive and r = +1 (see
fig.1)
ii) If all points lie on a falling straight line the correlation is perfectly negative and r = -1 (see
fig.2)
iii) If the points lie in narrow strip, rising upwards, the correlation is high degree of positive (see
fig.3)
iv) If the points lie in a narrow strip, falling downwards, the correlation is high degree of
negative (see fig.4)
v) If the points are spread widely over a broad strip, rising upwards, the correlation is low degree
positive (see fig.5)
vi) If the points are spread widely over a broad strip, falling downward, the correlation is low
degree negative (see fig.6)
vii) If the points are spread (scattered) without any specific pattern, the correlation is absent. i.e. r
= 0. (see fig.7)
Though this method is simple and is a rough idea about the existence and the degree of
correlation, it is not reliable. As it is not a mathematical method, it cannot measure the degree of
correlation.
2) Karl Pearsons coefficient of correlation: It gives the numerical expression for the measure
of correlation. it is noted by r . The value of r gives the magnitude of correlation and sign
denotes its direction. It is defined as
r =
where
N = Number of pairs of observation

Note : r is also known as product-moment coefficient of correlation.
OR r =
OR r =
Now covariance of x and y is defined as

Example Calculate the coefficient of correlation between the heights of father and his son for the
following data.
Height
of
father
(cm):
165 166 167 168 167 169 170 172
Height
of son
(cm):
167 168 165 172 168 172 169 171

Solution: n = 8 ( pairs of observations )
Height of
father
x
i

Height of
son
y
i

x
=
x
i
-
x
y =
y
i
-y
xy x
2
y
2

165 167 -3 -2 6 9 4
166 168 -2 -1 2 4 1
167 165 -1 -4 4 1 16
167 168 -1 -1 1 1 1
168 172 0 3 0 0 9
169 172 1 3 3 1 9
170 169 2 0 0 4 0
172 171 4 2 8 16 4
Ex
i
=1344 Ey
i
=1352 0 0 Exy=24 Ex
2
=36 Ey
2
=44
Calculation:



Now,

Since r is positive and 0.6. This shows that the correlation is positive and moderate (i.e. direct
and reasonably good).
Example From the following data compute the coefficient of correlation between x and y.

Example If covariance between x and y is 12.3 and the variance of x and y are 16.4 and 13.8
respectively. Find the coefficient of correlation between them.
Solution: Given - Covariance = cov ( x, y ) = 12.3
Variance of x ( o
x
2
)= 16.4
Variance of y (o
y
2
) = 13.8
Now,

Example Find the number of pair of observations from the following data.
r = 0.25, E (x
i
- x ) ( y
i
- y ) = 60, o
y
= 4, E ( x
i
- x )2 = 90.
Solution: Given - r = 0.25
If the values of x and y are very big, the calculation becomes very tedious and if we change the
variable x to u = and y to where x
0
and y
0
are the assumed means for
variable x and y respectively, then r
xy
= ruv
The formula for r can be simplified as


Example Marks obtained by two brothers FRED and TED in 10 tests are as follows:
Find the coefficient of correlation between the two.
Solution: Here x
0
= 60, c = 4, y
0
= 60 and d = 3





6.6 Coefficient Of Correlation For Bivariate Grouped Data
When the number of observations is very large, we need to arrange the data into different classes,
which are either discrete or continuous. Items having values falling in a particular class are
placed together and those having values falling in another class are placed together. Due to this
the whole data is divided into horizontal rows and vertical columns, with one variable placed
horizontally and the other placed vertically. The table so obtained is a two-way frequency
distribution table and is called the correlation table or Bi-variate frequency distribution table. The
formula for calculating and for bi-variate distribution is given by



STEPS:
1. First write down the mid-points of x along a horizontal raw and those of y along a
vertical column.
2. Find
3. Multiply each frequency by the corresponding value of u then by corresponding value of
v to get fuv. Write these numbers in the same box at the top.
4. Add the frequencies horizontally, and write down the total. Similarly add the frequencies
vertically and write down its total.
5. Multiply this additions of x by u to get f u.
6. Multiply this addition of y by v to get f v.
7. Multiply these frequencies by the square of u to get f u
2
.
8. Multiply these frequencies by the square of v to get f v
2
.
9. Add horizontally ( or vertically ) the top numbers denoting f u v written in each box ( or
cell )
10. Write down E f u, E f u
2
, E f v, E f v
2
and E f u v and then use the above formula.
Example Calculate the coefficient of correlation for the following data.
Age
(years)
of
Husband
Age (years) of wife
Total
10 -20 20 -30 30 -40 40 -50 50 -60
10 - 25
5
3
3 11 7 3
6
8
25 - 35
35 - 45
45 - 55
55 - 65
15
11
14
7
12
3
29
32
22
9
Total 8 29 32 22 9 100


Inserting, E fuv = 94, n = 100, E fu = -5, E fv = -5, E fu2 = 119 and E fv2 = 119 in








6.7 Probable Error
It is used to help in the determination of the Karl Pearsons coefficient of correlation r . Due to
this r is corrected to a great extent but note that r depends on the random sampling and its
conditions. it is given by

P. E. = 0.6745
i. If the value of r is less than P. E., then there is no evidence of correlation i.e. r is not
significant.
ii. If r is more than 6 times the P. E. r is practically certain .i.e. significant.
iii. By adding or subtracting P. E. to r , we get the upper and Lower limits within which r
of the population can be expected to lie.
Symbolically e = r P. E.
P = Correlation ( coefficient ) of the population.

Example If r = 0.6 and n = 64 find out the probable error of the coefficient of correlation.
Solution: P. E. = 0.6745
= 0.6745
=
= 0.57

6.8 Spearmans Rank Correlation Coefficient
This method is based on the ranks of the items rather than on their actual values. The advantage
of this method over the others in that it can be used even when the actual values of items are
unknown. For example if you want to know the correlation between honesty and wisdom of the
boys of your class, you can use this method by giving ranks to the boys. It can also be used to
find the degree of agreements between the judgements of two examiners or two judges. The
formula is :
R =
where R = Rank correlation coefficient
D = Difference between the ranks of two items
N = The number of observations.


Note: -1 s R s 1.
i) When R = +1 Perfect positive correlation or complete agreement in
the same direction
ii) When R = -1 Perfect negative correlation or complete agreement in
the opposite direction.
iii) When R = 0 No Correlation.
Computation:
i. Give ranks to the values of items. Generally the item with the highest value is ranked 1
and then the others are given ranks 2, 3, 4, .... according to their values in the decreasing
order.

ii. Find the difference D = R
1
- R
2
where R
1
= Rank of x and R
2
= Rank of y
Note that E D = 0 (always)
iii. Calculate D
2
and then find E D
2

iv. Apply the formula.
Note :
In some cases, there is a tie between two or more items. in such a case each items have ranks 4th
and 5th respectively then they are given = 4.5th rank. If three items are of equal rank say
4th then they are given = 5th rank each. If m be the number of items of equal ranks,
the factor is added to S D
2
. If there are more than one of such cases then this
factor added as many times as the number of such cases, then

Example Calculate R from the following data.
Student
No.:
1 2 3 4 5 6 7 8 9 10
Rank
in
Maths :
1 3 7 5 4 6 2 10 9 8
Rank
in
Stats:
3 1 4 5 6 9 7 8 10 2


Solution :
Student
No.
Rank
in
Maths
(R
1
)
Rank
in
Stats
(R
2
)
R
1
- R
2
D
(R
1
- R
2
)
2
D
2

1 1 3 -2 4
2 3 1 2 4
3 7 4 3 9
4 5 5 0 0
5 4 6 -2 4
6 6 9 -3 9
7 2 7 -5 25
8 10 8 2 4
9 9 10 -1 1
10 8 2 6 36
N = 10 S D = 0 S D
2
= 96
Calculation of R :

Example Calculate R of 6 students from the following data.
Marks
in Stats :
40 42 45 35 36 39
Marks
in
English
:
46 43 44 39 40 43
Solution:
Marks
in
Stats
R
1

Marks
in
English
R
2
R
1
- R
2

(R
1
-R
2
)
2

=D
2

40 3 46 1 2 4
42 2 43 3.5 -1.5 2.25
45 1 44 2 -1 1
35 6 39 6 0 0
36 5 40 5 0 0
39 4 43 3.5 0.5 0.25

N = 6 S D = 0 S D
2
= 7.50
Here m = 2 since in series of marks in English of items of values 43 repeated twice.





6.9 Linear Regression
Correlation gives us the idea of the measure of magnitude and direction between correlated
variables. Now it is natural to think of a method that helps us in estimating the value of one
variable when the other is known. Also correlation does not imply causation. The fact that the
variables x and y are correlated does not necessarily mean that x causes y or vice versa. For
example, you would find that the number of schools in a town is correlated to the number of
accidents in the town. The reason for these accidents is not the school attendance; but these two
increases what is known as population. A statistical procedure called regression is concerned
with causation in a relationship among variables. It assesses the contribution of one or more
variable called causing variable or independent variable or one which is being caused
(dependent variable). When there is only one independent variable then the relationship is
expressed by a straight line. This procedure is called simple linear regression.
Regression can be defined as a method that estimates the value of one variable when that of
other variable is known, provided the variables are correlated. The dictionary meaning of
regression is "to go backward." It was used for the first time by Sir Francis Galton in his research
paper "Regression towards mediocrity in hereditary stature."
Lines of Regression: In scatter plot, we have seen that if the variables are highly correlated then
the points (dots) lie in a narrow strip. if the strip is nearly straight, we can draw a straight line,
such that all points are close to it from both sides. such a line can be taken as an ideal
representation of variation. This line is called the line of best fit if it minimizes the distances of
all data points from it.
This line is called the line of regression. Now prediction is easy because now all we need to do
is to extend the line and read the value. Thus to obtain a line of regression, we need to have a line
of best fit. But statisticians dont measure the distances by dropping perpendiculars from points
on to the line. They measure deviations ( or errors or residuals as they are called) (i) vertically
and (ii) horizontally. Thus we get two lines of regressions as shown in the figure (1) and (2).
(1) Line of regression of y on x
Its form is y = a + b x
It is used to estimate y when x is given
(2) Line of regression of x on y
Its form is x = a + b y
It is used to estimate x when y is given.
They are obtained by (1) graphically - by Scatter plot (ii) Mathematically - by the method of
least squares.

ii. Let y = a + b y ..... (1) where a and b are given by the normal equations
E y = n a + b E x ..... (2)
Exy = a E x + b E x
2
.... (3)
where n be the number of pairs of values of x and y.

Equation (6) is the equation of the line of regression of y on x.

is called the coefficient of regression of y on x which is obviously the slope of this line.
Interchanging x and y in equation (6), the equation of the line of regression of x and y is given by


Naturally b
xy
is the slope of this line which is equal to

Example A panel of two judges A and B graded dramatic performance by independently
awarding marks as follows:

Solution:







The equation of the line of regression of y on x

Inserting x = 38, we get
y - 33 = 0.74 ( 38 - 33 )
y - 33 = 0.74 5
y - 33 = 3.7
y = 3.7 + 33
y = 36.7 = 37 ( approximately )
Therefore, the Judge B would have given 37 marks to 8th performance.
Example The two regression equations of the variables x an y are
x = 19.13 - 0.87 y and y = 11.64 - 0.50 x
Find (1) Mean of xs
(2) Mean of ys
(3) Correlation coefficient between x and y
Solution:
1. Calculation of Mean

\ Mean of xs = 15.94 and Mean of ys = 3.67
2. Calculation of r
x = 19.93 - 0.87 y
Therefore,
and y = 11.64 - 0.50 x
Therefore,
From (3) and (4) r = 0.66
But regression coefficient are negative
r = - 0.66
Example In a partially destroyed laboratory record of an analysis of correlation data, the
following results are legible:
Variance of x = 9
Regression equations : 8 x - 10 y + 66 = 6
40 x - 18 y = 214
What are (1) Means of xs and ys (2) the coefficient of correlation between x and y (3) the
standard deviation of y ?
Solution:
1. Means:
8 x - 10 y = -66 ----- (1)
40 x - 18 y = 214 ----- (2)
Solving (1) and (2) as
40 x - 50 y = -330 ----- (1)
40 x - 18 y = 214 ----- (2)
-32 y = -544
y = 17
Mean of ys 17
Substituting y = 17 in (1) we get 8x - 10 17 = -66
or 8x = 104 x = 13
Mean of xs = 13


2. Coefficient of correlation between x and y
40 x = 18 y + 214


Also -10 y = - 8 x - 66



Therefore,
3. Standard deviation of y
Variance of x i.e. o x
2
= 9 o x = 3
Now byx =
o y = 0.4
Example From 10 observations of price x and supply y of a commodity the results obtained E x
= 130, E y = 220, E x
2
= 2288, E xy = 3467
Compute the regression of y on x and interpret the result. Estimate the supply when the price of
16 units.
Solution: The equation of the line of regression of y on x
y = a + b x
Also from normal equations
E y = n a + b E x and E xy = a E x + b E x
2

we get
220 = 10 a + 130 b (1)
3467 = 130 a + 2288 (2)
Solving (1) and (2) as
2860 = 130 a + 1690 b
3467 = 130 a + 2288 b
On subtraction
607 = 598 b b = 1.002
Putting b = 1.002 in 220 = 10 a + 130 b, we get a = 8.974.
Hence the 3 equation of the line of regression of y on x is
y = 8.974 + 1.002 x

When x = 16, we get
y = 8.974 + 1.002 ( 16 )
y = 25.006
Example If u is the acute angle between the two regression lines in the case of two variables x
and y show that

with usual meanings. Explain the significance when r = 0 and r = 1.
Solution: The slopes of the two regression lines are










If r = u then tan u = or u = t/2 i.e. there is no relationship between two variables i.e.
independent or uncorrelated.
If r = 1 then u = 0. The two regression lines are coincident or parallel and the correlation is
perfect.