Measures of relationship

P. K. MUTETI
[email protected]
Definition

Measures of relationship. Statistical measures which show a relationship between

two or more variables
Correlation. Means the existence of definite relationship between two or more
variable. The manner in which the variables tend to vary together.
For example.
If one variable tends to increase at the same time that another variable increases,
there is a positive relationship between the two variables.
If one variable tends to decrease as another variable increases, we would say that
there is a negative relationship between the two variables.

P. K. MUTETI 2
Cont

As a child grows from an infant into a toddler into a young child, both the child's
height and weight tend to change.
Those changes are not always tightly locked to one another, but they do tend to
occur together.
So if we took a sample of children from a few weeks old to 3 years old and
measured the height and weight of each child, we would likely see a positive
relationship between the two.
With the relationship between height and weight in children, it is likely that the
general growth of children, which increases both height and weight, accounts for
the observed correlation.

P. K. MUTETI 3
Cont

A helpful way to visualize a relationship between two variables is to construct a

scatter plot.
A scatter plot represents each set of paired scores on a two dimensional graph, in
which the dimensions are defined by the variables of variables of height and
weight.
Suppose that our first child is 27 inches tall and 21 pounds. We would find the point
on the weight axis that represents 21 pounds and the point on the height axis that
represents 27 inches. (see diagram below).

P. K. MUTETI 4
Graphic representation of correlation coefficient of height and
weight in children

P. K. MUTETI 5
Types of correlation coefficients.

Are measures of the degree of relationship between two or more variable

Correlation may be classified into.
1. Positive linear correlation. There is a positive linear correlation when the
variable on the x -axis increases as the variable on the y -axis increases.
2. Negative linear correlation. When one variable increases as the other variable
decreases.
3. Non-linear correlation (known as curvilinear correlation). When the ratio of
change between two variables is not constant. Example- with the 20% increase
in the income the expenditure sometimes increase by 5% sometimes by 10% or
by 15%. Hence, it is non-linear correlation.
4. No Correlation. There is no relationship between the two variables.
P. K. MUTETI 6
Positive linear correlation

P. K. MUTETI 7
Curved correlation

P. K. MUTETI 8
Types of measures of relationship

1. Pearson product-moment correlation. Measure the level of relation between

linearly related variables.
Is an index of the degree of linear relationship between two variables that are
both measured on at least an ordinal scale of measurement.
The index is structured so the a correlation of 0.00 means that there is no linear
relationship
A correlation of +1.00 means that there is a perfect positive relationship
and a correlation of -1.00 means that there is a perfect negative relationship.

P. K. MUTETI 9
Cont

As you move from zero to either end of this scale, the strength of the relationship
increases.
You can think of the strength of a linear relationship as how tightly the data points
in a scatter plot cluster around a straight line.
In a perfect relationship, either negative or positive, the points all fall on a single
straight line.

P. K. MUTETI 10
Cont

The symbol for the Pearson correlation is a lowercase r, which is often subscripted
with the two variables.
For example, rxy stand for the correlation between the variables X and Y.

P. K. MUTETI 11
Karl pearsons coefficient of correlation

P. K. MUTETI 12
Where

r = Correlation coefficient
xi = values of the x-variable in a sample
x̄ the mean of the values of the x-variable
y = values of the y-variable in a sample
ȳ = the mean of the values of the y-variable

P. K. MUTETI 13
Cont

If r = 1 the relationship is perfectly positive.

An increase in one variable is related to an increase to another variable in the same
magnitude.
If r = 0 there is no correlation.
If r = -1 there is perfectly negative correlation.

P. K. MUTETI 14
Cont

2. Spearman rank-order correlation. The Spearman rank-order correlation provides an

index of the degree of linear relationship between two variables that are both measured
on at least an ordinal scale of measurement. If one of the variables is on an ordinal scale
and the other is on an interval or ratio scale, it is always possible to convert the interval or
ratio scale to an ordinal scale. That process is discussed in the section showing you how to
compute this correlation by hand.
The Spearman correlation has the same range as the Pearson correlation, and the numbers
mean the same thing. A zero correlation means that there is no relationship, whereas
correlations of +1.00 and -1.00 mean that there are perfect positive and negative
relationships, respectively.
The formula for computing this correlation is shown below. Traditionally, the lowercase r
with a subscript s is used to designate the Spearman correlation (i.e., rs). The one term in
the formula that is not familiar to you is d, which is equal to the difference in the ranks for
the two variables. This is explained in more detail in the section that covers the manual
computation of the Spearman rank-order correlation.

P. K. MUTETI 15
Spearman rank-order correlation formula

P. K. MUTETI 16
Cont

3. Phi correlation coefficient. The Phi coefficient is an index of the degree of relationship between
two variables that are measured on a nominal scale. Because variables measured on a nominal scale
are simply classified by type, rather than measured in the more general sense, there is no such thing
as a linear relationship. Nevertheless, it is possible to see if there is a relationship.
For example, suppose you want to study the relationship between religious background and
occupations. You have a classification systems for religion that includes Catholic, Protestant,
Muslim, Other, and Agnostic/Atheist. You have also developed a classification for occupations that
include Unskilled Laborer, Skilled Laborer, Clerical, Middle Manager, Small Business Owner, and
Professional/Upper Management. You want to see if the distribution of religious preferences differ
by occupation, which is just another way of saying that there is a relationship between these two
variables.
The Phi Coefficient is not used nearly as often as the Pearson and Spearman correlations. Therefore,
we will not be devoting space here to the computational procedures. However, interested students
can consult advances statistics textbooks for the details. you can compute Phi easily as one of the
options in the crosstabs procedure in SPSS for Windows. Click on the button below to see how.

P. K. MUTETI 17
Methods of studying correlation

1. Scatter diagrams method.

2. Karl pearsons coefficient of correlation.
3. Spearmans rank correlation coefficient.
4. Method of least of squares (regression line).

P. K. MUTETI 18
Scatter diagrams method

This is the simplest method in studying correlation in special type of dot chart in
two variables.
It is also known as dotogram or scatter diagram.
The given data are plotted on a graph paper in the form of dots

P. K. MUTETI 19
Cont

When the two sets of observations increase or decrease together (positive) the line
slopes upwards from left to right
When one set decreases as the other increases the line slopes downwards from left
to right.
As the line must be straight, it will probably pass through few, if any, of the dots

P. K. MUTETI 20
Cont

x representing the values of the independent variable (eg. height)

and y representing the values of the dependent variable ( eg. weight).

P. K. MUTETI 21
Perfectly positive

P. K. MUTETI 22
No correlation.

P. K. MUTETI 23
Perfect negative correlation.

P. K. MUTETI 24
Curvilinear correlation

P. K. MUTETI 25
Significance of the study of correlation

In practical life because of the following reasons:

1. Most of the variable show some kind of relationship.
2. We can measure in one figure the degree of relationship existing between the
variables.
3. Correlation analysis contributes to the economic behavior, aids in locating the
critically important variables on which others depend.
4. This may reveal to the economist the connection by which disturbances spread
and suggest the paths through which stabilizing forces become effective.

P. K. MUTETI 26
Covariance

Covariance is the measure of the joint variability of two random variables (X, Y).
For Example – Income and expense of households. The households having higher
Income (say X) will have relatively higher expenses (say Y) and vice-versa.
This kind of relationship between two variables is called joint variability and is
measured through covariance and correlation

P. K. MUTETI 27
Positive covariance:

If the variable(X) takes a higher value, the value of the corresponding variable(Y) is
also higher and vice-versa.
Eg. Income and Expense of Household. As X takes a higher value, the
corresponding values of Y is on the higher side E.x. Income and Expense of
Household. As X takes a higher value, the corresponding values of Y is on the higher
side

P. K. MUTETI 28
Positive covariance

P. K. MUTETI 29
Negative covariance

If the variable(X) takes a higher value, the value of the corresponding variable(Y) is
low and vice-versa.

Example: Price and demand. as the price of a commodity increases, its demand
decreases.

P. K. MUTETI 30
Negative covariance

P. K. MUTETI 31
Zero covariance or no covariance:

There is no linear relationship between variable(X) and variable(Y).

Note: The zero covariance means the covariance will be zero or near zero

P. K. MUTETI 32
Zero covariance or no covariance

P. K. MUTETI 33
Covariance formula

P. K. MUTETI 34
Regression

Regression means “going back towards the average”.

P. K. MUTETI 35
Simple linear regression:

Two variables are of interest. Variable ‘x’ and variable ‘y’

The variable ‘x’ is referred to as the independent variable because its controlled
by the investigator ie. Values of ‘x’ are fixed by the investigator. ‘y’ values are
known as dependent variable.
‘y’ is said to be depending / relying on ‘x’
Corresponding to each value of ‘x’, a value of ‘y’ is obtained
The variable ‘x’ is measured without error i.e. The values of measurement have
negligible error, since no measuring procedures

P. K. MUTETI 36
 The end

Thank you

P. K. MUTETI 37