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Mba724 s4 2 correlation
- 4. The Pearson correlation r is a numeric index of the relationship between two numeric
variables
Caution: if a variable is categorical (e.g., gender – male vs. female; ethic – white, black,
asian) you cannot correlate it with another variable. Pearson r can only be calculated
between two number variables (e.g., age, salary, height, weight)
R tells us how much the relationship is a straight line
These graphs are possible ways two variables relate to one another
The more the graph looks like a straight line, the stronger the r value is
The graphs that resemble a circle indicate very low or even no correlation between the two
variables
The direction of the line indicates whether the correlation is positive or negative
If the line goes up to the right, it’s a positive relationship (meaning, when X goes up, Y goes
up too)
If the line goes down to the right, it’s a negative relationship (meaning, when X goes up, Y
goes down)
For example, if when we get older, we also get wiser. If this is true, that means there should
be a positive and strong Pearson correlation r between the age variable and the wisdom
variable.
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- 11. We all want to have a positive relationship with our family, friends, coworkers, etc. Who
wants a negative relationship, right?
In that spirit, why would anyone want a negative correlation? And we should celebrate
every time we have a positive correlation, right?
How about a positive correlation between GDP and obesity level? How about a positive
correlation between smoking and cancer? How about a positive correlation between the
CEO’s compensation and corruption level?
Now let’s look at some negative correlations that are supposed to be “depressing:” more
exercise associated with lower levels of obesity, more education associated with lower
crime rate, fewer meetings associated increased productivity, and, how about more
relaxing weekends associated with lower stress levels?
What’s the moral of the story? Correlation is what it is – it’s a number that indicates the
strength and direction of a relationship between two numerical variables. Whether the
relationship is good for the mankind or not is beyond the scope of the humble little
number’s job!
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