Correlation Coefficient

Correlation and Linear Regression

Statisticsis also concerned

in determining whether a
relationship exists between
two or more variables.
 Scatter PLot
 Isa visual way to describe the nature of the
relationship between the variables. It is a
graph of ordered pairs (x, y) of numbers
consisting of the independent variable x
and dependent variable y. Graphing the
data on a scatter plot gives preliminary
information about the shape and spread of
the data.
 Example: Construct the scatter plot of the data shown for advertising cost (in thousands)
and sales (thousands) of several companies and determine whether there is a linear
relationship between the two variables.

Advertis 12 8 10 5 12 14 11 8 6
ing cost

Sales 20 12 15 10 18 20 18 10 11

STEP 1: Draw and label the x and y axes 25

STEP 2: Plot each point on the graph
20

15

10

0
4 6 8 10 12 14 16
 Correlation

 Itis a statistical method used to determine

whether a linear relationship or association
between variables exists.
Interpretation of Correlation
Coefficient
Correlation Coefficient Interpretation
- 1. 00 Perfect Negative Correlation
-0.76 to -0.99 Very High Negative Correlation
-0.51 to -0.75 High Negative Correlation
-0.26 to -0.50 Moderately Small Negative Correlation
-0.01 to -0.25 Very Small Negative Correlation
0.00 No Correlation
0.01 to 0.25 Very Small Positive Correlation
0.26 to 0.50 Moderately Small Positive Correlation
0.51 to 0.75 High Positive Correlation
0.76 to 0.99 Very High Positive Correlation
1.00 Perfect Positive Correlation
Pearson Product Moment Coefficient

r=

Where
n = number of data pairs
X = observed data for the independent variable
Y = observed data for dependent variables
 Example

A principal of a public high school wishes to

investigate how well the entrance
examination scores affect the grade point
average of the freshmen students. The data
of a random sample of 15 freshmen students
are as follows
Student Entrance GPA (Y) XY
Score
(X)
1 68 85 5780 4624 7225
2 56 80 4480 3136 6400
3 79 85 6715 6241 7225
4 53 79 4187 2809 6241
5 46 86 3956 2116 7396
6 80 87 6960 6400 7569
7 40 78 3120 1600 6084
8 69 83 5757 4761 6889
9 34 76 2584 1156 5776
10 26 75 1950 676 5625
11 76 88 6688 5776 7744
12 85 95 8075 7225 9025
13 52 78 4056 2704 6084
14 30 77 2310 900 5929
15 49 81 3969 2401 6561
TOTAL 843 1233 70557 52525 101773
Pearson Product Moment Coefficient

r=
r=
r= 0.86 Very High Positive Correlation
 Using t-test where the degree of freedom is
n – 2, the null hypothesis is rejected at a
specific level if there is a significant
difference between the value of r and 0.
Test the significance of the correlation coefficient
found in the example above. Use α = 0.05, n = 15, r
= 0.86
Following the five-step procedure, we have
1. Formulate the null and alternative hypotheses.
there is no significant relationship between the
entrance examination scores and the grade point
average of the freshmen students
there is a significant relationship between the
entrance examination scores and the grade point
average of the freshmen students
2. Specify the level of significance. α = 0.05
3. Critical value of t-test.
Df = n – 2
15 – 2 = 13
= 2.16
 4. COMPUTATION

= 0.86
6.08

= 2.16 < 6.08

5. Reject the null hypotheses, accept
alternative hypotheses meaning there is a
significant relationship between the entrance
examination scores and the grade point
average of the freshmen students