Correlation and Regression R23 INFORMATION TECHNOLOGY PROBABILITY AND STATISTICS
Correlation and Regression: 1) Correlation Correlation is a statistical concept that measures the degree and direction of relationship between two variables. If both variables increase together → Positive correlation If one increases while the other decreases → Negative correlation If there is no consistent pattern → No correlation Example: Height and weight → usually positive correlation Price and demand → usually negative correlation Correlation shows association, not causation . 2) Correlation Coefficient A correlation coefficient is a numerical measure of correlation. It tells us: Strength of relationship Direction of relationship The most common is Karl Pearson’s coefficient of correlation (r) . 🔹 Karl Pearson’s Correlation Coefficient r = C o v ( X , Y ) σ X σ Y r = \frac{Cov(X,Y)}{\sigma_X \sigma_Y} r = σ X σ Y C o v ( X , Y ) Where: C o v ( X , Y ) Cov(X,Y) C o v ( X , Y ) = Covariance between X and Y σ X \sigma_X σ ...