Faculty Name: Dr. M.

Massarrat Ali Khan

Course Name: Introduction to Statistics
Email: mokhan@iba.edu.pk
Week 5
 Z - Score

• The value of the z-score tells you how many standard deviations you are away
from the mean. ... A positive z-score indicates the raw score is higher than the
mean average. For example, if a z-score is equal to +1, it is 1 standard deviation
above the mean. A negative z-score reveals the raw score is below the mean
average.
• Z-scores are a way to compare results to a “normal” population. Results from tests
or surveys have thousands of possible results and units; those results can often
seem meaningless. For example, knowing that someone’s weight is 150 pounds
might be good information, but if you want to compare it to the “average”
person’s weight, looking at a vast table of data can be overwhelming (especially if
some weights are recorded in kilograms). A z-score can tell you where that
person’s weight is compared to the average population’s mean weight.
 Formula for Z - Score

To calculate the z-score, you first find the distance from the mean, and
then divide by the standard deviation.
 Example of Z- Score
• The mean score on a standardized test was 508 with a standard
deviation of 42. One test-taker’s score was 590. Find and interpret the
z-score for this score.
From the example, we have the following information:
• The mean is: μ=508
• The standard deviation is: σ=42
 Interpreting:

• By subtracting the mean from a data value, we will get a negative if it

is smaller than the mean and a positive if it is larger. So, the sign gives
the “direction” away from the mean. By dividing this difference by the
standard deviation, we are putting this distance between the mean
and the data value in terms of a number of standard deviations.
Therefore, we can say:
• “The test-score of 590 is about 1.95 standard deviations above the
mean.”
 Example

• A student get 82 marks in Statistics; the class mean is 75 marks with

standard deviation of 10 marks. In Economics he gets 86 marks where
the mean is 80 marks with standard deviation of 14 marks. Is his
relative standing is better in Statistics or Economics?
• His relative standing is higher in Statistics than in Economics, Why?
 Covariance & Correlation Coefficient

• Covariance is a measure of the joint variability of two random

variables. If the greater values of one variable mainly correspond with
the greater values of the other variable, and the same holds for the
lesser values, the covariance is positive.
 Example of Covariance:

• Calculate covariance for the following data set:

x: 2.1, 2.5, 3.6, 4.0 (mean = 3.1)
y: 8, 10, 12, 14 (mean = 11)
• Substitute the values into the formula and solve:
Cov(X,Y) = ΣE((X-μ)(Y-ν)) / n-1
= (2.1-3.1)(8-11)+(2.5-3.1)(10-11)+(3.6-3.1)(12-11)+(4.0-3.1)(14-11) /(4-1)
= (-1)(-3) + (-0.6)(-1)+(.5)(1)+(0.9)(3) / 3
= 3 + 0.6 + .5 + 2.7 / 3
= 6.8/3
= 2.267
• The result is positive, meaning that the variables are positively related.
• Positive covariance: Indicates that two variables tend to move in the
same direction.
• Negative covariance: Reveals that two variables tend to move in
inverse directions.

• Note on dividing by n or n-1:

When dealing with samples, there are n-1 terms that have the
freedom to vary (Degrees of Freedom). If you are finding the
covariance of just two random variables, just divide by n.
 Correlation Coefficient:

• A large covariance can mean a strong relationship between variables.

However, you can’t compare variances over data sets with different
scales (like pounds and inches). A weak covariance in one data set
may be a strong one in a different data set with different scales.

•  The correlation coefficient is a statistical measure of the strength of

the relationship between the relative movements of two variables.
The values range between -1.0 and 1.0. ... A correlation of 0.0 shows
no linear relationship between the movement of the two variables.
 Karl Pearson Correlation Coefficient Formula
• Karl Pearson Correlation Coefficient Formula
• The coefficient of correlation rxy between two variables x and y, for
the bivariate dataset (xi,yi) where i = 1,2,3…..N; is given by –
Example of Correlation Coefficient:
Advantages of the Correlation Coefficient
• The Correlation Coefficient has several advantages over covariance for
determining strengths of relationships:
• Covariance can take on practically any number while a correlation is
limited: -1 to +1.
• Because of it’s numerical limitations, correlation is more useful for
determining how strong the relationship is between the two
variables.
• Correlation does not have units. Covariance always has units
• Correlation isn’t affected by changes in the center (i.e. mean) or scale
of the variables
 Properties of Variance:

Variance Properties
• The variance, var(X) of a random variable X has the following
properties.
• Var(X + C) = Var(X), where C is a constant.
• Var(CX) = C2.Var(X), where C is a constant.
• Var(aX + b) = a2.Var(X), where a and b are constants.
• If X1, X2,……., Xn are n independent random variables, then 
• Var(X1 + X2 +……+ Xn) = Var(X1) + Var(X2) +……..+Var(Xn).
Moments About Mean:
Moments about Origin:
Example:
 Skewness:

• What Is Skewness?
• Skewness refers to distortion or asymmetry in a symmetrical bell
curve, or normal distribution, in a set of data. If the curve is shifted to
the left or to the right, it is said to be skewed. Skewness can be
quantified as a representation of the extent to which a given
distribution varies from a normal distribution. A normal distribution
has a skew of zero