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Subject

Paper No and Title Paper-2: Quantitative Methods-II (Statistical methods)

Module No and Title Module 25: Simple Partial and Multiple Correlation

Module Tag ECO_P2_M25

SUBJECT PAPER No. : 2- QUANTITATIVE METHODS II (STATISTICAL

METHODS)
MODULE No. : 25- SIMPLE PARTIAL AND MULTIPLE
CORRELATION
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TABLE OF CONTENTS
1. Learning Outcomes

2. Introduction

3. Partial correlation

4. Calculation of Partial correlation

5. Multiple Correlation

6. Formula of Multiple Correlation

7. Limitations of Multiple and Partial Correlation

8. Summary

SUBJECT PAPER No. : 2- QUANTITATIVE METHODS II (STATISTICAL

METHODS)
MODULE No. : 25- SIMPLE PARTIAL AND MULTIPLE
CORRELATION
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1. Learning Outcomes
After studying this module, you shall be able to

 Understand the concept of Partial correlation

 Compute Partial Correlation
 Comprehend the concept of Multiple correlation
 Compute Multiple Correlation
 Differentiate between Partial and Multiple Correlation
 Identify the Limitations of Partial and Multiple Correlation

2. Introduction
Simple correlation measures the strength of the linear relationship between two variables,
without taking into consideration the fact that both these variables may be influenced by a
third variable. To analyse the relationship between two variables accurately we need to
eliminate the influence of other variables. Generally, a large number of factors
simultaneously influence all social and natural phenomena. For example, when we study
the correlation between price (dependent variable) and demand (independent variable),
we completely ignore the effect of other factors like that of money supply, import and
exports etc. which definitely have an impact on the price. Hence, Partial correlation
studies the linear relationship between two variables after excluding the effect of one or
more independent factors.

3. Partial Correlation

Partial Correlation explains the relationship between two variables while controlling for a
third variable. The motive is to find out a unique variance between the given two
variables and simultaneously eliminating the variance from a third variable. We define
partial correlation co-efficient as the correlation co-efficient that exists between given
two variables X1 and X2, studied partially after eliminating the influence of the third
variable X3 from both of them. We undertake partial correlation when the third variable
has shown a relationship to one or both of the primary variables. In other words, we first
conduct correlational analysis on all variables so that we can check whether there are
significant relationships amongst the variables, including any "third variables" that may
have a significant relationship to the variables under investigation.
SUBJECT PAPER No. : 2- QUANTITATIVE METHODS II (STATISTICAL
METHODS)
MODULE No. : 25- SIMPLE PARTIAL AND MULTIPLE
CORRELATION
____________________________________________________________________________________________________

Zero order co-efficient is a term defined to explain the simple correlation between two
variables. It is called zero order co-efficient, since in simple correlation, no factor is held
constant. A first order co-efficient is a term used to define the partial correlation between
two variables by keeping the third variable constant. It is called first order co-efficient as
in this case, one variable is kept constant. In the same way, we can define a second order
co-efficient and so on as the third variable can be more than one. The partial correlation
co-efficient varies between -1 and +1. Its calculation is based on the simple correlation
co-efficient.

The partial correlation analysis has a great importance while studying the phenomena
which have multiple factors influencing them, especially in physical and experimental
sciences. In such cases, it is possible to control the variables and the effect of each
variable can be studied separately. This technique is of great use in various experimental
designs where various interrelated phenomena are to be studied.

4. Calculation of Partial Correlation

Partial correlation allows us to examine the relationship between two variables with the
effect of the third removed from both. It statistically removes the systematic relationship,
by eliminating the linear trend, then correlate the residuals. Partial Correlation
Coefficient is represented as rY X1. X2, where Y and X1 are two variables and the third
variable is X2.
The partial correlation formula is as follows:

Through this formula we are able to eliminate the impact of X2 on Y and X1.
We can also calculate Semi Partial Correlations, in this we examine the relationship
between two variables with the effect of the third removed from one. The formula is:

SUBJECT PAPER No. : 2- QUANTITATIVE METHODS II (STATISTICAL

METHODS)
MODULE No. : 25- SIMPLE PARTIAL AND MULTIPLE
CORRELATION
____________________________________________________________________________________________________

In this formula we have removed the impact of X2 only on X1. Therefore, it is referred to
as semi partial correlations.
We can illustrate partial correlations with the help an example.

Illustration 1:

We have to find correlation between the income and number of TV hours watched daily
and eliminate the impact of number of years of education.

Dependent Variable = income; measured in dollars

Independent Variable = tv hours; measured in daily hours watched

Control Variable (CV) = education; measured in years

Hypotheses:

Null: There is no relationship between the number of TV hours watched daily and
income, adjusting for the number of years of education. r = 0

Research: There exists a relationship between the number of TV hours watched daily and
income, adjusting for the number of years of education. r ≠ 0

If we control for the effect that education has on the relationship between number of TV
hours watched daily and income, we find the following by doing a partial correlation with
the data:

We get the partial correlation coefficient as, r = -.11 and p value as p = .000.

Since p is less than alpha. Reject null.

Hence, we can conclude that there is a weak, negative relationship between the number of
TV hours watched daily and income when we control for the effect of education. As the
number of daily TV viewing hours goes up, income goes down for people of any level of
education (r = -.11, p = .000). In other words, as income level goes up, the number of
daily TV viewing hours goes down.

r2 = .11 * .11 = .0121

SUBJECT PAPER No. : 2- QUANTITATIVE METHODS II (STATISTICAL

METHODS)
MODULE No. : 25- SIMPLE PARTIAL AND MULTIPLE
CORRELATION
____________________________________________________________________________________________________

Thus, when we control for the effect of education, the number of TV hours watched daily
explains 1% of the variation in income. Or, when controlling for the effect of
education, income explains 1% of the variation in the number of TV hours watched
daily.

5. Multiple Correlation

The coefficient of multiple correlation is used to evaluate how well a given variable can
be predicted using a linear function of a set of other variables. It is calculated by taking
the square root of the coefficient of determination, but considering particular assumptions
that an intercept is included and that the best possible linear predictors are used. Here, we
study the effects of all the independent variables simultaneously on a dependent variable.
For example, the correlation co-efficient between the yield of paddy (X1) and the other
variables, viz. type of seedlings (X2), manure (X3), rainfall (X4), humidity (X5) is the
multiple correlation co-efficient R1.2345. The coefficient of multiple correlation, denoted
by R, is a scalar which is defined as the Pearson correlation coefficient between the
predicted and the actual values of the dependent variable in a linear regression model that
includes an intercept as well.
The value of coefficient of multiple correlation lies between zero and one; with a higher
value indicating a better predictability of the dependent variable from the independent
variables. Its value one indicates that the predictions are exactly correct and a value of
zero indicates that no linear combination of the independent variables is a better predictor
than is the fixed mean of the dependent variable. In other words, the closer the R is to
one, the stronger the linear association and if R equal zero, then there is no linear
association between the dependent variable and the independent variables.

6. Formula of Multiple Correlation

The Sample Multiple Correlation Coefficient, R, measures the strength of the association
between the independent (explanatory) variables and the one dependent (prediction)
variable. R can be any value from 0 to +1. Unlike the simple correlation coefficient, r,
which tells both the strength and direction of the association, R tells only the strength of
the association. R is never a negative value. This can be seen from the formula below,
since the square root of this value indicates the positive root.

SUBJECT PAPER No. : 2- QUANTITATIVE METHODS II (STATISTICAL

METHODS)
MODULE No. : 25- SIMPLE PARTIAL AND MULTIPLE
CORRELATION
____________________________________________________________________________________________________

Formula for two independent variables, X1 and X2:

Where ryx1, ryx2 and r x1x2 are correlation coefficients between the two variables.

7. Limitations of Partial and Multiple Correlation

This concept has certain limitations which are stated below:

The computation of partial correlation coefficient is based on the simple correlation

coefficient and it assumes linear relationship. This assumption is not valid in social
sciences as it rarely exists in such phenomenon.

As we increase the order of the partial correlation coefficient the reliability of the
coefficient decreases.

The limitations in case of multiple correlation are quite similar to those of partial
correlation. If multiple and partial correlation are studied together, a very useful analysis
of the relationship between the different variables is possible.

Another technique which can be used to overcome the limitations of simple correlation is
multiple regression analysis.

SUBJECT PAPER No. : 2- QUANTITATIVE METHODS II (STATISTICAL

METHODS)
MODULE No. : 25- SIMPLE PARTIAL AND MULTIPLE
CORRELATION
____________________________________________________________________________________________________

8. Summary

 Partial correlation analysis establishes a linear relationship between two variables

after excluding the effect of one or more independent factors.

 The partial correlation co-efficient varies between -1 and +1.

 The partial correlation formula is as follows:

 Multiple correlation studies the effect of all the independent variables

simultaneously on a dependent variable.

 The value of the coefficient of multiple correlation lies between zero and one.

 Multiple Correlation formula for two independent variables, X1 and X2 is as

follows:

 Both the techniques suffer from certain limitations whose solution arises in the
concept of multiple regression.

SUBJECT PAPER No. : 2- QUANTITATIVE METHODS II (STATISTICAL

METHODS)
MODULE No. : 25- SIMPLE PARTIAL AND MULTIPLE
CORRELATION