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Arithmetic Mean (AM):

Arithmetic Mean (simply mean) or is a measure that determines a value
(observation) of the variable under study by dividing the sum of all
values (observations) of the variable by their number of
observations. We denote Arithmetic mean by.
Arithmetic mean (AM) =
Arithmetic mean of n observations
or

= =

Example of Arithmetic Mean :

The salaries of five teachers are as follows. Find the mean salary
11500, 12400, 15000, 14500, 14800.
Solution:

=
= 13640 Rupees

Variance
The Variance is defined as average of thesquareddifferences from
the Mean.A measurement of the spread between numbers in a data
set. The variance measures how far each number in the set is from
the mean.Variance is denoated by 2.

Here
2= variance
(X - )2= The sum of (X - )2for all datapoints
X = individual data points 0r random variable
=meanof the population
N = number of data points

To calculate the variance follow these steps:

Calculate theMean(the simple average of the numbers)
Then for each number: subtract the Mean and square the result
Then work out the average of those squared differences. (Why Square?)
Example
You and your friends have just measured the heights of your dogs (in millimeters):

The heights (at the shoulders) are: 600mm, 470mm, 170mm, 430mm and
300mm.
Find out the Variance.

First step is to find out the mean

so the mean (average) height is 394 mm. Let's plot this on the chart:

Now we calculate each dog's difference from the Mean:

So the Variance Is 21,704

So the Variance is 224.3

Covariance :
Covariance is one of the statistical measurement to know the relationship of the
variances between the two variables. It helps us to know whether the two variables
vary together or change together.
Here the sign of covariance tells us the nature of the relationship of the variances. If
the covarience is positive, then the two variablesxandymove in the same
direction. If its negative then the variables move in opposite directions.
In the same way, size of the covariance helps us to know the strength of the
relationship. If the covariance is large, then there is a strong relationship, if its small,
then there is a weak or no relationship with the two variables.
The Covariance is denoted asCov(X,Y)and is given as,

Correalation
The word Correlation is made ofCo-(meaning "together"), andRelation.
Correlation is a statistical technique that can show whether and how strongly pairs of
variables are related. When two sets of data are strongly linked together we say
they have aHigh Correlation
Correlation isPositivewhen the valuesincreasetogether.
Correlation isNegativewhen one valuedecreasesas the other increases.
Like this

Correlation coefficient
The most familiar measure of dependence between two quantities is the Pearson's
correlation coefficient", commonly called correlation coefficient.
The main result of a correlation is called thecorrelation coefficient(or "r"). It ranges
from -1.0 to +1.0. The closer r is to +1 or -1, the more closely the two variables are
related.
If we have a series ofnmeasurements ofXandYwritten asxiandyiwherei= 1,
2, ...,n, then thesample correlation coefficientcan be used to estimate the
population Pearson correlationrbetweenXandY. The sample correlation coefficient
is written as

or

Example: Ice Cream Sales

The local ice cream shop keeps track of how much ice cream they sell versus the
temperature on that day, here are their figures for the last 12 days.
Ice Cream Sales vs Temperature
Temperature C

Ice Cream Sales

14.2

$215

16.4

$325

11.9

$185

15.2

$332

18.5

$406

22.1

$522

19.4

$412

25.1

$614

23.4

$544

18.1

$421

22.6

$445

17.2

$408

What will be the correlation?

And here is the same data as ascatter plot

We can easily see that warmer weather leads to more sales, the relationship is good
but not perfect.

Steps to solve the correlation coefficient

Let us call the two sets of data "x" and "y" (in our case Temperature isxand Ice Cream
Sales isy):
Step 1: Find the mean ofx, and the mean ofy
Step 2: Subtract the mean of x from every x value (call them "a"), do the same for y
(call them "b")
Step 3: Calculate:a b,a2andb2for every value
Step 4: Sum upa b, sum upa2and sum upb2
Step 5: Divide the sum of a b by the square root of [(sum of a 2) (sum of b2)]
After this we will put all values in the formula to finout the correlation