1 Economic Research 1 & 2: A Modularized Instruction by Eddie Seva See

Correlation

Module 1. Pearson r and its test of significance of relationship

Learning Objectives
1. Define/describe Pearson r
2. Explain and illustrate the computational process involved in Pearson r
3. Define/describe the test of significance for Pearson r
4. Explain and illustrate the computational process involved in the test

Pearson sample r represents the extent to which the same

individual, respondent, object or subject occupies the same relative
position on two variables. It’s the summation of the products of the
standard value of one variable and the standard value of the other
variable divided by the number of individuals, respondents, objects or
subjects less one or the “average” of the product of the standard value of
the individuals in one variable and their standard value in the other
variable.
r = ∑ (zxzy)
n-1
where
zx= x – x where sx is the standard deviation of the values of x
sx

sx = n∑x2- (∑x)2
n(n-1)

zy= y – y where sy is the standard deviation of the values of y

sy

Illustration no. 1.

Ms. Interested is interested to find out if a female college student’s

membership in organizations has something to do with her love affairs.
From a population of one thousand students, she interviewed 10
randomly selected participants students and noted the number of their
organizations and the number of their boyfriends. Determine the strength
of relationship between number of organizations and number of
boyfriends among the 10 students using Pearson r and find out if this
relationship among the 10 students is significant enough to exist in the
1,000 populace employing t-test.

Respondent Number of organizations (x) Number of boyfriends

(y)
Alexandra 1 1
Bettina 3 2
Corina 5 4
Doring 2 2
Eppie 3 3
2 Economic Research 1 & 2: A Modularized Instruction by Eddie Seva See

Farida 6 4
Godiva 10 8
Hiawatha 6 5
Ildefonsa 2 1
Judith 3 1

Strength of relationship

Pearson correlation coefficient, r

Solution. To make use of the formula the values of and must be

computed first.
zx = zy
=
Resp x x2 x-x (x-x)/2.69 y y2 y-y (y-
y)/2.23 zxzy
A 1 1 1-4.1=-3.1 –3.1/2.69=-1.152 1 1 1-3.1=-2.1 -
2.1/2.23=-0.942 1.085
B 3 9 3-4.1=-1.1 -0.409 2 4 2-3.1=-1.1
-0.493 0.202
C 5 25 5-4.1= 0.9 0.335 4 16 4-3.1= 0.9
0.404 0.135
D 2 4 2-4.1—2.1 -0.781 2 4 2-3.1=-1.1
-0.493 0.385
E 3 9 3-4.1=-1.1 -0.409 3 9 3-3.1=-0.1
-0.045 0.018
F 6 36 6-4.1= 1.9 0.706 4 16 4-3.1= 0.9
0.404 0.285
G 10 100 10-4.1= 5.9 2.193 8 64 8-3.1= 4.9
2.197 4.818
H 6 36 6-4.1= 1.9 0.706 5 25 5-3.1= 1.9
0.852 0.601
I 2 4 2-4.1=-2.1 -0.781 1 1 1-3.1=-2.1
-0.942 0.736
J 3 9 3-4.1=-1.1 -0.409 1 1 1-3.1=-2.1
-0.942 0.385
∑= 41 233 31 141
8.65
x = 4.1 y = 3.1

sx = 10(233)-(41)2
10(9)

sx = 2330- 1681 = 649 = 7,211 = 2.69

90 90

sy = 10(141)-(31)2
10(9)

sy = 1410- 961 = 449 = 4,988 = 2.23

90 90

r = ∑ (zxzy) = 8.65 = 0.96. This indicates that 96% of the changes in the number of boyfriends of a
n-1 9 female college student can be accounted for by its linear relationship with
the frequency of membership to organizations.

If the equations of
3 Economic Research 1 & 2: A Modularized Instruction by Eddie Seva See

zx= ___ x-x________

n∑x2- (∑x)2
n(n-1)

and
zy = ___ y-y________
n∑y2- (∑y)2
n(n-1)

will be substituted in the equation r = ∑ (zxzy)

n-1

the formula r = ________n ∑xy – ∑x∑y_________ can be

generated.

[n∑x2 – (∑x)2] [n∑y2 – (∑y)2]

Resp x x2 y y2 xy
A 1 (1)(1) = 1 1 (1)(1)= 1 (1)(1)=1
B 3 (3)(3)= 9 2 (2)(2)= 4 (3)(2)=6
C 5 25 4 16 20

D 2 4 2 4 4

E 3 9 3 9 9

F 6 36 4 16 24

G 10 100 8 64 80
H 6 36 5 25 30
I 2 4 1 1 2

J 3 9 1 1___ 3
∑= 41 233 31 141 179

r = ________n ∑xy – ∑x∑y_________

[n∑x2 – (∑x)2] [n∑y2 – (∑y)2]

r = ________10 (179) – (41)(31)______ = 0.96

[10(233) – (41)2] [10(141) – (31)2]

A very strong relationship of 0.96 is observed between the number

of organizations and the number of boyfriends of the 10 probability
4 Economic Research 1 & 2: A Modularized Instruction by Eddie Seva See

sample female students from whom the data were taken. Can this
strength of relationship be expected in the 1,000 population represented
by the 10? This question will be answered by the test of significance.

Test of significance of the relationship

T-test of Pearson r

Tc = __r_____

1-r2
n-2
TT = Tα, n-2
2
Ho. There is no significant correlation or population correlation is zero
Ha: There is significant correlation or population correlation is not equal to
zero.

If tc < tt, accept Ho or If tc > - tt, accept Ho.

If tc > tt or tc < -tt, reject Ho and accept Ha.

Tc = __0.96_____ = 9,70

1-0.962
10-2

TT = T0.05, 10-2 = 2.306

2
Since Tc ( = 9.70) > TT (= 2.306), reject the null hypothesis of
zero population relationship

This result shows that although the data were taken only from 10
students, the relationship detected can be said to also be present in the
1,000 population.

Application Activity 1.

Ms. Socialista conducted a probability sample survey for her

research titled Socio-economic Status Changes and Changes in
Consumer Preference and Satisfaction. The purpose of this study is to
determine the relationship between changes in consumer socio-economic
status and changes in brand preferences and overall satisfaction with
product purchases and service obtainment. It is anchored on the concept
that “consumers tend to persist in the thought patterns and behaviors to
which they are accustomed”, hence investigating change in their existing
life-style pattern would be relevant. Among the hypotheses that she
intends to answer is “There is a significant positive correlation between
the number of status changes and the number of changes in brand
preferences”.

Data:
5 Economic Research 1 & 2: A Modularized Instruction by Eddie Seva See

Respondent Number of status changes Number of changes

Number in brand preferences
001 3 4
002 2 3
003 4 4
004 3 3
005 4 3
006 1 2
007 2 3
008 3 3
009 1 1
010 5 4

She needs to determine the extent of correlation between the

number of status changes and the number of changes in brand
preferences and test if this correlation is significant at α = 0.05

Strength of relationship

Pearson r

r = ________n ∑xy – ∑x∑y_________

[n∑x2 – (∑x)2] [n∑y2 – (∑y)2]

r = ________10 (93) – (28)(30)_____

[10(94) – (28)2] [10(98) – (30)2]

r = ________930 – 840_________ = 0.806

6 Economic Research 1 & 2: A Modularized Instruction by Eddie Seva See

(940 – 784) [980 – 900)

T-test of Pearson r

Tc = __0.806_____

1-r2
n-2
TT = Tα, n-2
2

Tc = __0.806_____ = 18.403

1-0.962
10-2

TT = T0.05, 10-2 = 2.306

2

Since Tc ( = 18.403) > TT (= 2.306), reject the null hypothesis of zero

population relationship

Application Activity 2.

Mr. Competitor conducted a documentary analysis for his study

“Intratype Competition: In-mall Product Stalls versus Out-mall Product
Stores” the data of which were taken through probability sampling. His
study draws on the conjecture that “ the structure of competition interacts
with marketing strategies employed by firms in determining the profit
performance as well as the contribution of those firms to societal welfare
“(Thorelli 1977) wherein market structure is defined as “the manner by
which the sale of some commodity is organized by the firms engaged in
trading it “(Bucklin 1972).” The purpose of his study was to investigate the
determinants of competition between product stalls located inside the mall
and product stores outside the mall. One of the hypotheses that he
sought answer is “There is a relationship between quality of service and
sales”.

He has to find out the strength of relationship between quality of

service and sales and determine id such relationship is significant at α =
0.05

Data:
Quality of service (in score from 1 to 10 with 10 as the best) and
sales of out-mall grocery stores (probability sampled)

Out-mall store number Quality of service Sales

(P000,000/month)
7 Economic Research 1 & 2: A Modularized Instruction by Eddie Seva See

001 6 4
002 4 3
003 8 8
004 7 6
005 9 10
006 10 10
007 1 1
008 3 5
009 2 3
010 5 6

Pearson r

r = ________n ∑xy – ∑x∑y_________

[n∑x2 – (∑x)2] [n∑y2 – (∑y)2]

r = _____10 (384) – (55)(56)_________ = 0.92177

[10(385) – (55)2] [10(396) – (56)2]

T-test of Pearson r

Tc = __0.922_____

1-0.9222
10-2
TT = Tα, n-2
2

Tc = __0.922_____ = 6.73

1-0.85
8
8 Economic Research 1 & 2: A Modularized Instruction by Eddie Seva See

TT = T0.05, 10-2 = 2.306

2

Since Tc ( = 6.73) > TT (= 2.306), reject the null hypothesis of zero

population relationship

Module 2. Point-biserial correlation and its test of significance of

relationship

Learning Objectives
1. Define/describe point-biserial correlation
2. Explain and illustrate the computational process involved in point biserial
correlation
3. Define/describe the test of significance for point-biserial correlation
4. Explain and illustrate the computational process involved in the test

Point biserial correlation is used when the explanatory variable

under study has a cardinal (ratio/interval) measure and the dependent
variable has a nominal dichotomous measure.

Illustration

Pastor Jess investigated the behavior of male members of his

congregation regarding confession. He asked the 10 probability sampled
members (from a population of 1,000) whether they confess their sins or
not. His intention was to eventually find out if there is an association
between age and confession among the 10 members and if this
association also exists in the population represented. Following are the
data he gathered.

Age Observance of confession

9 Confesses
14 Confesses
22 Does not confess
45 Does not confess
33 Does not confess
43 Does not confess
11 Confesses
15 Confesses
37 Does not confess
42 Does not confess

Strength of relationship

Point biserial correlation, rpb

The independent variable has a cardinal (ratio/interval) measure

The dependent variable is dichotomous.
Due to insufficiency of samples, chi-square test cannot be applied
9 Economic Research 1 & 2: A Modularized Instruction by Eddie Seva See

rpb = 1 –0 (n1)(n0)
s n(n-1)

1= mean age of those who confess

0= mean age of those who do not confess
Confesses is given a nominal numeral of 1
Does not confess is given a nominal numeral of 0
n1 = number or frequency of those who confess
n0 = number or frequency of those who do not confess
s = standard deviation of the ages

Age (x)Observance of confession (y)x2

9 Confesses 81
14 Confesses 196
22 Does not confess 484
45 Does not confess 2025
33 Does not confess 1089
43 Does not confess 1849
11 Confesses 121
15 Confesses 225
37 Does not confess 1369
42 Does not confess 1764
∑x = 271 ∑x 2 = 9203

s= n∑x2 – (∑x)2
n(n-1)
s= 10(9203) – (271)2
10(10-1)

s = 14.37

Age, confesses, x1 Frequency Age, does not confess, x0

Frequency
9 1
14 1
22
1
45
1
33
1
43
1
11 1
15 1
37
1

42________________1_________
10 Economic Research 1 & 2: A Modularized Instruction by Eddie Seva See

∑x1= 49 n1 = 4 ∑x0 =222 n0 = 6

1= 49/4=12.25 0 = 222/6=37

rpb = 1 –0 (n1)(n0) = 12.25 –37 (4)(6)

s n(n-1) 14.37 10(10-1)

rpb = -24.75 24 = -1.722 0.2666667 = -1722 ( 0.516) = -0.89

(very
14.37 90
strong inverse

relationship)

Results show a -0.89 (inverse) strength of relationship between

the 10 male members’ age and confession. Is this observable in the 1,000
population? The test of significance will tell.

Test of significance of the relationship

T-test

Ho. There is no significant correlation or population correlation is zero

Ha: There is significant correlation or population correlation is not equal to
zero.

If tc < tt, accept Ho or If tc > - tt, accept Ho.

If tc > tt or tc < -tt, reject Ho and accept Ha.

tc = rpb = -0.89 -0.89 -0.89 -0.89 =

-0.89 =--5.56

0.161
1- rpb2 1- 0.892 = 1- 0.7921 = 0.2079 = .02599
n-2 10-2 8 8

tt = t0.05/2, 10-2 = t0.025, 8 = 2.306

Inasmuch as tc (=-.5.56) < -tt (= -2.306), reject Ho and accept Ha.

There is significant correlation.

This proves that although the relationship was computed just from
the 10 members, there is statistical basis to claim that such relationship
also exists in the entire population of 1,000.

Application Activity

Pastor Jess investigated the behavior of male members of his

congregation regarding confession. He asked the 10 probability sampled
11 Economic Research 1 & 2: A Modularized Instruction by Eddie Seva See

members (from a population of 1,000) whether they confess their sins or

not. His intention was to eventually find out if there is an association
between age and confession among the 10 members and if this
association also exists in the population represented. Following are the
data he gathered.

Age Observance of confession

9 Confesses
14 Confesses
22 Does not confess
45 Does not confess
33 Does not confess
43 Does not confess
11 Confesses
15 Confesses
37 Does not confess
42 Does not confess

a. Determine the magnitude of relationhip

b. Test the significance of the relationship

Module 3. Spearman rank correlation and its test of significance of

relationship

Learning Objectives
1. Define/describe Spearman rank correlation
2. Explain and illustrate the computational process involved in Spearman rank
correlation
3. Define/describe the test of significance for Spearman rank correlation
4. Explain and illustrate the computational process involved in the test

Spearman rank correlation is applied to studies whose

explanatory and dependent variables have both ordinal measure. In
cases where only one has an ordinal measure, the other one must be
converted to ordinal measure.

Illustration:

The ranks in Physics class and in English class of five randomly

selected students (from a population of 500) are listed below. Determine r
rho among the 5 students and use Spearman test to find out if this
relationship found among the 5 is also existent among the 500 students.

Student Rank in Physics Rank in English

A 4 5
B 5 4
C 1 2
D 3 1
12 Economic Research 1 & 2: A Modularized Instruction by Eddie Seva See

E 2 3
Solution:
X rank Y rank D = x rank-y rank D2
4 5 -1 1
5 4 1 1
1 2 -1 1
3 1 2 4
2 3 -1 1
2
∑D = 8
Strength of relationship

Spearman rho, r rho

Spearman rank/order correlation coefficient, r rho is a tool used with

ordered or ranked data.

r rho = 1- _6 ∑D2
n(n2-1) where D = rank of x minus rank of y

r rho = 1- _6 ∑D2 = 1 – 6(8) = 1- 48 = 1- 48 = 1- 0.4 = 0.6

n(n2-1) 5(25-1) 5(24) 120

A strong relationship of 0.6 is present between rank in physics and

rank in English among the 5 students studied. Is this also likely to be true
to the 500 population? The test of significance will show.

Significance of the relationship

Spearman test

Ho. There is no significant correlation or population correlation is zero

Ha: There is significant correlation or population correlation is not equal to
zero.

If rhoc < rhot, accept Ho or If rhoc > - rhot, accept Ho.

If rhoc > rhot or rhoc < -rhot, reject Ho and accept Ha.

rhoc = 0.6; rhot (at n = 5, two-tailed, alpha = 0.05) =1.00

Inasmuch as rhoc (= 0.6) < rhot (= 1.00), accept Ha. There is no

significant correlation.

This indicates that although a strong relationship between rank in

Physics and rank in English is observable among the 5 students, this
cannot be viewed (in other words, it is zero) among the entire population.

Application Activity
13 Economic Research 1 & 2: A Modularized Instruction by Eddie Seva See

The ranks in Physics class and in English class of five randomly

selected students (from a population of 500) are listed below. Determine r
rho among the 5 students and use Spearman test to find out if this
relationship found among the 5 is also existent among the 500 students.

Student Rank in Physics Rank in English

A 4 5
B 5 4
C 1 2
D 3 1
E 2 3
Solution:
X rank Y rank D = x rank-y rank D2
4 5 -1 1
5 4 1 1
1 2 -1 1
3 1 2 4
2 3 -1 1
∑D2 = 8
a. Determine the magnitude of relationship
b. Test the significance of the relationship