ENG201

Applied Probability and Statistics

for Joint Prob D
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Lecture 15. Expected Values. Covariance.
Correlation
ELNARA KUSSINOVA

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Expected Values
Definition. Let X and Y be jointly distributed rv’s with pmf p(x, y) or pdf f (x, y) according to
whether the variables are discrete or continuous. Then the expected value of a function h(X, Y),
denoted by E[h(X, Y)] or h(X, Y), is given by

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Expected Values
Example 1:

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Expected Values
Example 1:

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Practice Problem
A nut company markets cans of deluxe mixed nuts containing almonds, cashews, and peanuts.
Suppose the net weight of each can is exactly 1 lb, but the weight contribution of each type of nut
is random. The joint pdf of the amount X of almonds and amount Y of cashews in a 1-lb can of
nuts is

If 1 lb of almonds costs the company $1.00, 1 lb of cashews costs $1.50, and 1 lb of peanuts costs
$.50. What is expected total cost?

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Practice Problem: Solution
A nut company markets cans of deluxe mixed nuts containing almonds, cashews, and peanuts.
Suppose the net weight of each can is exactly 1 lb, but the weight contribution of each type of nut
is random. The joint pdf of the amount X of almonds and amount Y of cashews in a 1-lb can of
nuts is

If 1 lb of almonds costs the company $1.00, 1 lb of cashews costs $1.50, and 1 lb of peanuts costs
$.50. What is expected total cost?
The total cost of the contents of a can is:

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Covariance
When two random variables X and Y are not independent, it is frequently of interest to assess how strongly
they are related to one another.

Definition. The covariance between two rv’s X and Y which are not independent is

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Covariance

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Covariance
Example 2:

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Covariance
Example 2:

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Covariance
Proposition.

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Covariance
Example 3:

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Covariance
Example 3:

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Covariance
Example 3:

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Correlation
Definition. The correlation coefficient of X and Y, denoted by Corr(X, Y), X,Y, or just , is
defined by

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Correlation
Example 4:

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Correlation
Example 4:

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 Correlation
Proposition.
1. If a and c are either both positive or both negative,
Corr(aX + b, cY + d) = Corr(X, Y)
2. For any two rv’s X and Y, –1  Corr(X, Y)  1.

Linear Relationship between r.v.s X and Y is strong, if ||≥ 0.8

moderate, if 0.5 <||< 0.8
weak, if ||≤ 0.5

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Correlation
Proposition.
1. If X and Y are independent, then  = 0, but  = 0 does not imply independence
2.  = 1 or –1 iff Y = aX + b for some numbers a and b with a  0.

 is a measure of the degree of linear relationship between X and Y

When  = 0, X and Y are said to be uncorrelated.

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Correlation
Example 5:

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