Chapter 6: Measures of Association & Correlation in Business (Vocabulary, Quiz, and Practice Exam Questions)
Which of the following Pearson Coefficients is MOST statistically significant?
A coefficient with a p-value of 0.01
In order to use the CORREL function in Excel, what is needed?
Two arrays of numeric data
Correlation Coefficient
defined as a numerical representation of the strength and direction of the relationship
If you don't see the Data Analysis option in the Data ribbon, what do you need to do?
Enable the Add-in in Excel
To plot a scatterplot, the researcher must have:
A reason to suspect they are connected, numerical data, and two variables
The price of a small company's stock correlated to a large capital index measurement is -0.02. What of the following is best understood from this fact?
The company stock price has a random statistical relationship to the index
Which of the following is TRUE about the correlation coefficient?
It is a measure of the statistical relationship between x and y
Which of the following is TRUE about the coefficient of determination?
It is a quantity that indicates how well a statistical model fits a data set
Based on the data below, what can we say about Investments and Sales?
There is a negative correlation between Investments and Sales
A scientist plots data points from an experiment, and notices that the dependent variables and the independent variables in the data set are decreasing together. What kind of correlation have they discovered, and why?
A positive correlation, because these describe situations where the dependent variables and the independent variables in a data set increase or decrease together.
Joe is doing an analysis of data for his Economics 104 class. He has the value of the foreign direct investment and political stability of one country. What could he learn about this relationship from the Pearson Coefficient?
How strong the relationship is
A portfolio of stocks has a correlation to a global energy index of +0.85. If you desire risk reduction in the portfolio, what is the best course of action?
Sell some of your energy stocks and purchase other unrelated assets
Susan conducts a study and is able to make a scatterplot from the data she gathers. Susan's study is chosen to be published in a scientific journal, but does not include her scatterplot. Which of the following explains why Susan chooses not to include her scatterplot in the scientific journal?
Susan does not include her scatterplot because the coefficient correlation is sufficient.
James is analyzing data for his final class. His teacher asked him to conduct a Pearson R test and to interpret the result. When calculating the Pearson R, James determined the increase of one variable correlates with a strong decrease of the other variable. What is the MOST likely value of the Pearson R Coefficient?
The MOST likely value is -0.87. This probably means that there is a high negative coefficient, between -0.85 and -0.95. Keep in mind that if the coefficient value is in the negative range, then that means the relationship between the variables is negatively correlated - as one value increases, the other decreases.
How are the coefficient of determination and the correlation coefficient related?
The coefficient of determination is equivalent to the square of the correlation coefficient
A company has to pay more in tariffs each year, and passes all of the added cost along to its customers as part of the retail sales price. If everything else stays exactly the same, what can be said about the correlation of tariffs and higher prices, as measured by that company?
The correlation of tariffs and higher prices will be positive
Every time the Federal Reserve bank decreases the prime lending rate by 1%, automobile sales go up by 2%. Which of the following is the best statement to make regarding the correlation of these values?
The two actions appear to be negatively correlated
There is a correlation coefficient between bean bag sales and drunk driving citations (0.86). What does this mean?
There is a strong relationship between the variables
How can you access the CORREL function in Excel?
Click on the fx icon and search/select
What does r represent?
Correlation coefficient
In order to find a Pearson correlation, the distribution of the data must be
Normal
Standard Correlation Coefficent
can be derived using the differences between those individual values and their averages
Pearson correlation
is a statistical procedure for determining the correlation of normally distributed, interval or ratio data
Scatterplot
is a visual representation of the relationship between two variables
Normally distributed
is a way to describe the spread of the data
Statistical procedure
simply means a statistical formula
You can use the CORREL function to calculate
the coefficient or use an Add-in, the Analysis ToolPak
What is it called when dependent variables and independent variables in a data set either increase or decrease opposite from one another?
Negative Correlation
Zoe needs to analyze the strength of the relationship between two variables. What is the correct name for the test she needs to conduct?
Pearson R
