Correlation

The board of directors of Bata Company is faced with the problem of estimating what the annual sales might be in a shop to be opened in Bagpur where Bata has not operated before. They need this information in order to plan the size of the shop, the amount of stock to be put on the showcase, the number of employees to be hired. An answer to this problem may be found statistically by establishing the general relationship in the cities in which the company is already operating, say between the size of a city’s employed labor force or working population and sales in its Bata shops. From the size of Bagpur’s employed labor force, an estimation of the annual sales in that new shop can be estimated, and the board of directors should be able to base its decision on this estimate.

But the board will also want to know how good this estimate is, since it is based only on a general relationship between sales and employment. Further still, the board may want to compare the relationship existing between sales and labor force on one hand with the relationship existing between sales and number of shops on the other hand. Such problems can be solved through correlation analysis.

Correlation does not deal with one series but rather with the association or relationship between two series and does not measure variation in one series but rather compare variation in two or more series. The existence of correlation between variables does not necessarily mean that one is the cause of the movement in the other. It should be noted that the correlation analysis merely helps in determining the degree of association between two variables, but it does not tell anything about the cause and effect relationship.

Correlation analysis is based on the relationship between two or more variables. The degree of relationship between the variables under consideration is measured through the correlation analysis. The measure of correlation called correlation coefficient, summarizes in one figure the direction and degree of correlation. The direction of change is indicated by + or – signs; the former refers to the movement in the same direction and the latter in the opposite direction; an absence of correlation is indicated by zero. This coefficient ranges between –1 and 1. 

Posted Date: 9/15/2012 3:59:05 AM | Location : United States

Ask an Expert

Related Discussions:- Correlation, Assignment Help, Ask Question on Correlation, Get Answer, Expert's Help, Correlation Discussions

Write discussion on Correlation
Your posts are moderated

Write your message here..

Related Questions

Multivariate analysis, Multivariate analysis involves a set of techniques t... Multivariate analysis involves a set of techniques to analyse data sets on more than one variable. Many of these techniques are modern and often involve quite sophisticated use of

Determine the subset of variables, Agency revenues. An economic consultant ... Agency revenues. An economic consultant was retained by a large employment agency in a metropolitan area to develop a regression model for predicting monthly agency revenues ( y ).

Applied, Question 1 Suppose that you have 150 observations on production (... Question 1 Suppose that you have 150 observations on production (yt) and investment (it), and you have estimated the following ADL(3,2) model: (1 – 0.5L – 0.1L2 – 0.05L3)yt = 0.7

Explain ridge regression, Using log(x1), log(x2) and log(x3) as the predict... Using log(x1), log(x2) and log(x3) as the predictors, do pair wise scatterplots of all pairs of variables (including the response) and comment (use the pairs function). Do you thin

Multiple correspondence analysis, Correspondence analysis is an exploratory... Correspondence analysis is an exploratory technique used to analyze simple two-way and multi-way tables containing measures of correspondence between the rows and colulnns of an

Decision making ., it is said that management is equivalent to decision mak... it is said that management is equivalent to decision making? do you agree? explain

Calculating 40th percentile in ogive graph, how do i determine the 40th per... how do i determine the 40th percentile in an ogive graph

Median, The median, as the name suggests, is the middle value of a series a... The median, as the name suggests, is the middle value of a series arranged in any of the orders of magnitude i.e. ascending or descending order. As distinct from the arithmetic

Using the asymptotic distribution test the hypothesis, You are interested i... You are interested in testing the distance of two golf balls, Brand A and Brand B. You take a random sample of 100 golfers, each of whom hits Brand A once and Brand B once. Define

Statistical definition of probability, Statistical Definition of probabilit... Statistical Definition of probability: Ques: (a) (i)  Distinguish Statistical Definition of probability from the Classical Definition.                  (ii) State the A