Correlation : It is defined as degree of relationship between the two

variables.For ex :price & demand ,Demand & supply ,Height &

weight etc.
Types of correlation :
1. Positive & Negative.
2. Simple , Partial
3. Linear & Non-linear.
Methods of studying correlation :
1. Scatter Diagram method.
2. Karl Pearson's Coefficient of Correlation.
3. Spearman's Rank Correlation method.
Properties of correlation coefficient :
1. It is independent of units of measurement.
2. It is independent of change of origin & scale.
3. It always lies between –1 &+1
Problems
• Calculate the correlation coefficient between price & supply.
Price(Rs /Unit) : 8 10 15 17 20 22 24 25
Supply(thousands): 25 30 32 35 37 40 42 45
• Calculate correlation coefficient between age & playing habbits
Age : 20 21 22 23 24 25
No.of students : 500 400 300 240 200 160
Regular players : 400 300 180 96 60 24
•Compute corrn. coeff betn test scores &sales.Does it indicate that
termination of services of a salesman with low test scores is justified?
Test scores : 14 19 24 21 26 22 15 20 19
Sales(in 000s): 31 36 48 37 50 45 33 41 39
•Compute r betn turnover rate(X) & environmental rating(Y)
X : 11 19 7 12 13 10 16 22 14 12
Y: 6 4 8 3 7 8 3 2 5 6
•The corrn coeff betn X&Y is 0.64.Their cov is 16. The var of X is
19.Find s.d. of Y series.
•Given r=0.8 ,sum(xy)=60,s.d(y)=2.5 ,sumx2=90.Find no. of
observations.x & y are deviations from A.M
•The var of the variables are 49 & 81.the cov. Is 12. Find r.
•In a bivariate data
sumX=12.3,sumY=213,sumX2=15.76,sumY2=3600 sumXY=183,
n=16.Find r=?
•In a bivariate data sum of the squared deviations taken from A.M.
for Xis412 & for Y it is 53 7 product of the deviations from A.M. for
X &Y is 47. Find r.
•In a bivariate data the two var & covar are equal. Find r
•The two var are 25 &449 & corrn coeff is –0.8.Find the covar.
•If s.d of y is 369 ,covar(x,y)=12.3 &r=0.1.Finds.d.of x.
•Find rank corrn coeff
X : 77 89 68 98 71 87 65 93 80 75
Y : 74 89 72 95 80 91 70 86 78 82
•Calculate rank corrn coeff
X : 18 28 35 44 35 26 37 48
Y :83 51 34 34 34 28 46 47
•In a beauty contest 10 ladies are ranked by 3 judges as follows
Judge 1: 4 7 2 1 5 10 9 6 3 8
Judge 2 :6 5 1 2 9 10 3 7 4 8
Judge 3 :6 8 2 1 5 9 10 3 4 7
Which two of three judges have closer taste in beauty ?

•In an examination six students were ranked as follows :

I exam: 1 2 3 4 5 6
2 exam: 2 1 5 6 4 3 find rank corrn co
REGRESSION :
“It is a method of estimating the value of one variable for a given of
another variable.” OR
The statistical method that helps to formulate an algebraic relationship
bet.two or more variables in the form of an equation to estimate
the value of a variable,given the value of another variable, is
called regression analysis.The variable whose value is estimated is
dependent variable &the variable whose value is used as a basis
for the estimate is called independent variable.the linear equation
used for expressing a dependent variable in terms of independent
variable is called linear regression equation.
There are two regression equations :
1)Regression eqn. of X on Y.
2)Regression eqn. of Y on X .
Regression eqn. of x on y is used to estimate the value of x for a given
value of y.here x is a dependent variable &y is is an independent
variable.I t is given by--------
Regression eqn of y on x is used to estimate the value of y for a given
value of x.Here y is a dependent variable & x is an independent
variable.It is given by--------
REMARKS
• when the variables are perfectly correlated, these lines coincide that
is we have only one regression line.
•Higher the degree of correlation, nearer the two regression line are to
each other.
• If r=0 the two lines are at right angle to each other.
•The two regression lines meet each other at the average value of x&y
Properties of regression coefficients:
•The G.M. of the two regression coefficients is corrn coeff.
•Regression coeffs are indt. Of change of origin but not of scale.
•The regn coeffs cannot be of opp. Signs i,e
If r is positive, both the regn coeffs are positive.
If r is negative, -----------------------------negative.
If r is 0,--------------------------------------0.
•Since r can not be greater than 1,the product of regn. Coeffs also can
not be greater than 1.
•The A.M. of the regn coeffs is more than or equal to r.
•The regn coeff of x on y is the change in x for a unit change in y&
the regn coeff of y on x is the change in y for a unit change in x.
Problems
•An analyst in a certain co.was studying the relationship bet travel
expenses in rupees(y) for102 sales trips & the duration in days (x) of
these trips .He has found that the relationship bet y& x is linear.A
summary of the data is given below: sum x=510, sum y=7140,
Sumx2=4150, sumxy=54,900, sum y2=7,40,200
a) Estimate the two regn eqns from the above data.
b) If trip takes 7 days,how much money should the salesman be
allowed so that he will never run short of money.
•The following data gives the age of cars &their maintenance
costs.obtain regn eqn for costs related to age.
Age of cars(in yrs) :2 4 6 8
Maintenance cost(in 100 Rs): 10 20 25 30
Following is the information about advertisement expenditure &
sales: adv.exp(x) in cr sales(y) in cr

mean 20 120
s.d 5 25
Corrn coeff is 0.8
•Calculate the two regn eqns.find the likely sales, when exp is Rs 25
crore.
•What should be the adv budget if the co wants to achieve sales
target of Rs150 crore.