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Home>Lesson18:TheCorrelationCoefficient

Lesson18:TheCorrelationCoefficient
Introduction
Inthepreviouslesson,welearnedaboutthejointprobabilitydistributionof
tworandomvariablesXandY.Inthislesson,we'llextendourinvestigation
oftherelationshipbetweentworandomvariablesbylearninghowtoquantify
theextentordegreetowhichtworandomvariablesXandYareassociated
orcorrelated.Forexample,SupposeXdenotesthenumberofcupsofhot
chocolatesolddailyatalocalcaf,andYdenotesthenumberofapple
cinnamonmuffinssolddailyatthesamecaf.Then,themanagerof
thecafmightbenefitfromknowingwhetherXandYarehighlycorrelatedor
not.Iftherandomvariablesarehighlycorrelated,thenthemanagerwould
knowtomakesurethatbothareavailableonagivenday.Iftherandom
variablesarenothighlycorrelated,thenthemanagerwouldknowthatit
wouldbeokaytohaveoneoftheitemsavailablewithouttheother.Asthe
titleofthelessonsuggests,thecorrelationcoefficientisthestatistical
measurethatisgoingtoallowustoquantifythedegreeofcorrelation
betweentworandomvariablesXandY.

Objectives
TolearnaformaldefinitionofthecovariancebetweentworandomvariablesXandY.
TolearnhowtocalculatethecovariancebetweenanytworandomvariablesXandY.
Tolearnashortcut,oralternative,formulaforthecovariancebetweentworandomvariablesXandY.
TolearnaformaldefinitionofthecorrelationcoefficientbetweentworandomvariablesXandY.
TolearnhowtocalculatethecorrelationcoefficientbetweenanytworandomvariablesXandY.
TolearnhowtointerpretthecorrelationcoefficientbetweenanytworandomvariablesXandY.
TolearnthatifXandYareindependentrandomvariables,thenthecovarianceandcorrelationbetween
XandYarebothzero.
TolearnthatifthecorrelationbetweenXandYis0,thenXandYarenotnecessarilyindependent.
Tolearnhowthecorrelationcoefficientgetsitssign.
Tolearnthatthecorrelationcoefficientmeasuresthestrengthofthelinearrelationshipbetweentwo
randomvariablesXandY.
Tolearnthatthecorrelationcoefficientisnecessarilyanumberbetween1and+1.
Tounderstandthestepsinvolvedineachoftheproofsinthelesson.
Tobeabletoapplythemethodslearnedinthelessontonewproblems.

CovarianceofXandY
Here,we'llbeginourattempttoquantifythedependencebetweentworandomvariablesXandYby
investigatingwhatiscalledthecovariancebetweenthetworandomvariables.We'lljumprightinwithaformal
definitionofthecovariance.

Definition.LetXandYberandomvariables(discreteorcontinuous!)withmeansXandY.Thecovarianceof
XandY,denotedCov(X,Y)orXY,isdefinedas:
(

) =

[(

)(

)]

C ov(X, Y ) = XY

= E[(X X )(Y Y )]

Thatis,ifXandYarediscreterandomvariableswithjointsupportS,thenthecovarianceofXandYis:
C ov(X, Y ) = (x X )(y Y )f (x, y)
(x,y)S

And,ifXandYarecontinuousrandomvariableswithsupportsS1andS2,respectively,thenthecovariance
ofXandYis:
C ov(X, Y ) =

S2

S1

(x X )(y Y )f (x, y)dxdy

Example
SupposethatXandYhavethefollowingjointprobabilitymassfunction:

WhatisthecovarianceofXandY?

Solution.

Twoquestionsyoumighthaverightnow:1)Whatdoesthecovariancemean?Thatis,whatdoesittellus?and
2)Isthereashortcutformulaforthecovariancejustasthereisforthevariance?We'llbeansweringthefirst
questioninthepagesthatfollow.Well,sortof!Inreality,we'llusethecovarianceasasteppingstonetoyet
anotherstatisticalmeasureknownasthecorrelationcoefficient.And,we'llcertainlyspendsometimelearning
whatthecorrelationcoefficienttellsus.Inregardstothesecondquestion,let'sanswerthatonenowbywayof
thefollowingtheorem.

Theorem.ForanyrandomvariablesXandY(discreteorcontinuous!)withmeansXandY,thecovarianceofX
andYcanbecalculatedas:
C ov(X, Y ) = E(XY ) X Y

Proof.Inordertoprovethistheorem,we'llneedtousethefact(whichyouareaskedtoproveinyour
homework)that,eveninthebivariatesituation,expectationisstillalinearordistributiveoperator:

Example(continued)
SupposeagainthatXandYhavethefollowingjointprobabilitymassfunction:

UsethetheoremwejustprovedtocalculatethecovarianceofXandY.

Solution.

Nowthatweknowhowtocalculatethecovariancebetweentworandomvariables,XandY,let'sturnour
attentiontoseeinghowthecovariancehelpsuscalculatewhatiscalledthecorrelationcoefficient.

CorrelationCoefficientofXandY
ThecovarianceofXandYneccessarilyreflectstheunitsofbothrandomvariables.Itishelpfulinsteadtohave
adimensionlessmeasureofdependency,suchasthecorrelationcoefficientdoes.

Definition.LetXandYbeanytworandomvariables(discreteorcontinuous!)withstandarddeviationsXand
Y,respectively.ThecorrelationcoefficientofXandY,denotedCorr(X,Y)or
definedas:
C ov(X, Y )
XY = C orr(X, Y ) =

XY

=
X Y

(thegreekletter"rho")is

X Y

Example(continued)
SupposethatXandYhavethefollowingjointprobabilitymassfunction:

WhatisthecorrelationcoefficientofXandY?

Solution.Onthelastpage,wedeterminedthatthecovariancebetweenXandYis1/4.And,weare
giventhatthestandarddeviationofXis1/2,andthestandarddeviationofYisthesquarerootof1/2.
Therefore,itisastraightforwardexercisetocalculatethecorrelationbetweenXandYusingthe
formula:
1
4

XY =
(

1
2

) (

= 0.71
1
2

Sonowthenaturalquestionis"whatdoesthattellus?".Well,we'llbeexploringtheanswertothatquestionin
depthonthepagetitledMoreonUnderstandingRho,butfornowletthefollowinginterpretationsuffice.

InterpretationofCorrelation
OnthepagetitledMoreonUnderstandingRho,wewillshowthat1
coefficientisinterpretedas:

XY 1

.Then,thecorrelation

1. IfXY = 1 ,thenXandYareperfectly,positively,linearlycorrelated.
2. IfXY = 1 ,thenXandYareperfectly,negatively,linearlycorrelated.
3. IfXY = 0 ,thenXandYarecompletely,unlinearlycorrelated.Thatis,XandYmaybeperfectly
correlatedinsomeothermanner,inaparabolicmanner,perhaps,butnotinalinearmanner.
4. IfXY > 0 ,thenXandYarepositively,linearlycorrelated,butnotperfectlyso.
5. IfXY < 0 ,thenXandYarenegatively,linearlycorrelated,butnotperfectlyso.
So,forourexampleabove,wecanconcludethatXandYarepositively,linearlycorrelated,butnotperfectly
so.

UnderstandingRho
Onthispage,we'llbeginourinvestigationofwhatthecorrelationcoefficienttellsus.Allwe'llbedoinghereis
gettingahandleonwhatwecanexpectofthecorrelationcoefficientifXandYareindependent,andwhatwe
canexpectofthecorrelationcoefficientifXandYaredependent.Onthenextpage,we'lltakeamoreindepth
lookatunderstandingthecorrelationcoefficient.Let'sstartwiththefollowingtheorem.

Theorem.IfXandYareindependentrandomvariables(discreteorcontinuous!),then:
C orr(X, Y ) = C ov(X, Y ) = 0

Proof.Forthesakeofthisproof,letusassumethatXandYarediscrete.(Theproofthatfollowscan
beeasilymodifiedifXandYarecontinuous.)Let'sstartwiththeexpectedvalueofXY.Thatis,let's
seewhatwecansayabouttheexpectedvalueofXYifXandYareindependent:

Thatis,wehaveshownthatifXandYareindependent,thenE(XY)=E(X)E(Y).Nowtherestofthe
prooffollows.IfXandYareindependent,then:
C ov(X, Y ) = E(XY ) X Y
= E(X)E(Y ) X Y
= X Y X Y = 0

andtherefore:
C ov(X, Y )
C orr(X, Y ) =

=
X Y

= 0

X Y

Let'stakealookatanexampleofthetheoreminaction.Thatis,intheexamplethatfollows,weseeacasein
whichXandYareindependentandthecorrelationbetweenXandYis0.

Example
LetX=outcomeofafair,black,6sideddie.Becausethedieisfair,we'dexpecteachofthesixpossible
outcomestobeequallylikely.Thatis,thep.m.f.ofXis:
1
fX (x) =

,
6

x = 1, , 6.

LetY=outcomeofafair,red,4sideddie.Again,becausethedieis
fair,we'dexpecteachofthefourpossibleoutcomestobeequally
likely.Thatis,thep.m.f.ofYis:
1
fY (y) =

y = 1, , 4.

Ifwetossthepairofdice,the24possibleoutcomesare(1,1)(1,2)
...(1,4)...(6,1)...(6,4),witheachofthe24outcomesbeing
equallylikely.Thatis,thejointp.m.f.ofXandYis:
f (x, y)

1
=

x = 1, 2, , 6,

y = 1, , 4.

24

Althoughweintuitivelyfeelthattheoutcomeoftheblackdieisindependentoftheoutcomeofthereddie,we
canformallyshowthatXandYareindependent:
1
f (x, y) =
24

1
fX (x)fY (y) =

x, y
4

WhatisthecovarianceofXandY?WhatthecorrelationofXandY?

Solution.Well,themeanofXis:
1
X = E(X) = xf (x) = 1 (
x

1
) + + 6(

21
) =

= 3.5
6

And,themeanofYis:
1
Y = E(Y ) = yf (y) = 1 (
y

1
) + + 4(

10
) =

= 2.5
4

TheexpectedvalueoftheproductXYis:
1
E(XY ) = xyf (x, y) = (1)(1) (
x

1
) + (1)(2) (

24

1
) + + (6)(4) (

24

210
) =

24

= 8.75
24

Therefore,thecovarianceofXandYis:
C ov(X, Y ) = E(XY ) X Y = 8.75 (3.5)(2.5) = 8.75 8.75 = 0

andtherefore,thecorrelationbetweenXandYis0:
C ov(X, Y )
C orr(X, Y ) =

0
=

X Y

= 0
X Y

Again,thisexampleillustratesasituationinwhichXandYareindependent,andthecorrelation
betweenXandYis0,justasthetheoremstatesitshouldbe.

Note,however,thattheconverseofthetheoremisnotneccessarilytrue!Thatis,zerocorrelationandzero
covariancedonotimplyindependence.Let'stakealookatanexamplethatillustratesthisclaim.

Example

LetXandYbediscreterandomvariableswiththefollowingjointprobabilitymassfunction:

WhatisthecorrelationbetweenXandY?And,areXandYindependent?

Solution.ThemeanofXis:
2
X = E(X) = xf (x) = (1) (

1
) + (0) (

2
) + (1) (

) = 0
5

AndthemeanofYis:
2
Y = E(Y ) = yf (y) = (1) (

1
) + (0) (

2
) + (1) (

) = 0
5

TheexpectedvalueoftheproductXYisalso0:
1
E(XY ) = (1)(1) (

1
) + (1)(1) (

1
) + (0)(0) (

5
1
E(XY ) =

5
1

1
) + (1)(1) (

1
+ 0

1
) + (1)(1) (

)
5

1
+

= 0
5

Therefore,thecovarianceofXandYis0:
C ov(X, Y ) = E(XY ) X Y = 0 (0)(0) = 0

andthereforethecorrelationbetweenXandYisnecessarily0.
Yet,XandYarenotindependent,sincetheproductspaceisnotrectangular!Thatis,wecanfindan
xandayforwhichthejointprobabilitymassfunctionf(x,y)can'tbewrittenastheproductoff(x),the
probabilitymassfunctionofX,andf(y),theprobabilitymassfunctionofY.Forexample,whenx=0
andy=1:
f (0, 1) = 0 fX (0)fY (1) = (1/5)(2/5) = 2/25

Insummary,again,thisexampleillustratesthatifthecorrelationbetweenXandYis0,itdoesnot
necessarilymeanthatXandYareindependent.Onthecontrary,we'veshownacasehereinwhich
thecorrelationbetweenXandYis0,andyetXandYaredependent!

Thecontrapositiveofthetheoremisalwaystrue!Thatis,ifthecorrelationisnotzero,thenXandYare
dependent.Let'stakealookatanexamplethatillustratesthisclaim.

Example
Aqualitycontrolinspectorforatshirtmanufacturerinspectstshirtsfordefects.Shelabelseachtshirtshe
inspectsaseither:

"good"
a"second"whichcouldbesoldatareducedprice,or
"defective,"inwhichthetshirtcouldnotbesoldatall
Thequalitycontrolinspectorinspectsn=2tshirts:
LetX=#ofgoodtshirts.Historically,theprobabilitythatatshirtisgood
isp1=0.6.
LetY=#ofsecondtshirts.Historically,theprobabilitythatatshirtis
labeledasasecondisp2=0.2.
Let2XY=#ofdefectivetshirts.Historically,theprobabilitythatatshirtis
labeledasdefectiveis1p1p2=10.60.2=0.2
Then,thejointprobabilitymassfunctionofXandYisthetrinomialdistribution.
Thatis:
2!

f (x, y) =

0.6 0.2 0.2

2xy

0 x + y 2

x!y!(2 x y)!

AreXandYindependent?And,whatisthecorrelationbetweenXandY?

Solution.First,XandYareindeeddependent,sincethesupportistriangular.Now,forcalculating
thecorrelationbetweenXandY.TherandomvariableXisbinomialwithn=2andp1=0.6.
Therefore,themeanandstandarddeviationofXare1.2and0.69,respectively:

X b(2, 0.6)

= np1 = 2(0.6) = 1.2

= np1 (1 p1 ) = 2(0.6)(0.4) = 0.69

TherandomvariableYisbinomialwithn=2andp2=0.2.Therefore,themeanandstandarddeviationofYare
0.4and0.57,respectively:

Y b(2, 0.2)

= np2 = 2(0.2) = 0.4

= np2 (1 p2 ) = 2(0.2)(0.8) = 0.57

TheexpectedvalueoftheproductXYis:

E(XY ) = xyf (x, y)

x

2!
= (1)(1)

0.6 0.2 0.2

= 2(0.6)(0.2) = 0.24

1!1!0!

Therefore,thecovarianceofXandYis0.24:
C ov(X, Y ) = E(XY ) X Y = 0.24 (1.2)(0.4) = 0.24 0.48 = 0.24

andthecorrelationbetweenXandYis0.61:
C ov(X, Y )
C orr(X, Y ) =

0.24
=

X Y

= 0.61
(0.69)(0.57)

Insummary,again,thisisanexampleinwhichthecorrelationbetweenXandYisnot0,andXandY
aredependent.

MoreonUnderstandingRho
Althoughwestartedinvestigatingthemeaningofthecorrelationcoefficient,we'vestillbeendancingquiteabit
aroundwhatexactlythecorrelationcoefficient:

C ov(X, Y )
C orr(X, Y ) = =

(x X )(y Y )f (x, y)
y

X Y

X Y

tellsus.Sincethisisthelastpageofthelesson,Iguessthereisnomoreprocrastinating!Let'sspendthis
page,then,tryingtocomeupwithanswerstothefollowingquestions:
1.
2.
3.
4.

HowdoesXY getitssign?
WhyisXY ameasureoflinearrelationship?
Whyis1 XY 1 ?
WhydoesXY closeto1or+1indicateastronglinearrelationship?

Question#1
Let'stacklethefirstquestion.HowdoesXY getitssign?Well,wecangetagoodfeelfortheanswertothat
questionbysimplystudyingtheformulaforthecorrelationcoefficient:

ThestandarddeviationsXandYarepositive.Therefore,theproductXYmustalsobepositive(>0).And,
thejointprobabilitymassfunctionmustbenonnegative...well,positive(>0)foratleastsomeelementsofthe
support.Itistheproduct:
(x X )(y Y )

thatcanbeeitherpositive(>0)ornegative(<0).Thatis,thecorrelationcoefficientgetsitssign,thatis,itis
eithernegativeorpositive+,dependingonhowmostofthe(x,y)pointsinthesupportrelatetothex=Xand
y=Ylines.Let'stakealookattwoexamples.
SupposewewereinterestedinstudyingtherelationshipbetweenatmosphericpressureXandtheboilingpoint
Yofwater.Then,ourplotmightlooksomethinglikethis:

pressureboiiingwater

Theplotsuggeststhatastheatmosphericpressureincreases,sodoestheboilingpointofwater.Now,what
doestheplottellusabouttheproduct:
(x X )(y Y )

Well,ittellsusthis:
plot

Thatis,intheupperrightquadrant,thedifferencebetweenany(x,y)datapointandthex=Xlineispositive
andthedifferencebetweenany(x,y)datapointandthey=Ylineispositive.Therefore,any(x,y)datapointin
theupperrightquadrantproducesapositiveproduct(x X )(y Y ) .Nowforthelowerleftquadrant,
wheretheremainingpointslie.Inthelowerleftquadrant,thedifferencebetweenany(x,y)datapointand
thex=Xlineisnegativeandthedifferencebetweenany(x,y)datapointandthey=Ylineisnegative.
Therefore,any(x,y)datapointinthelowerleftquadrantalsoproducesapositiveproduct(x X )(y Y ) .
So,regardless...everydatapointinthisplotsproducesapositiveproduct(x X )(y Y ) .Therefore,
whenweaddupthosepositiveproductsoverallxandy,we'regoingtogetapositivecorrelationcoefficient.In
general,whenthereisapositivelinearrelationshipbetweenXandY,thesignofthecorrelationcoefficientis
goingtobepositive.Makesintuitivesense!
Now,let'stakealookatanexampleinwhichtherelationshipbetweenXandYisnegative.Supposewewere
interestedinstudyingtherelationshipbetweenaperson'sIQXandthedelinquencyindexYoftheperson.
Well,oneresearcherinvestigatedtherelationship,andpublishedaplotthatlookedsomethinglikethis:

plot

TheplotsuggeststhatasIQsincrease,thedelinquencyindicesdecrease.Thatis,thereisaninverseor
negativerelationship.Now,whatdoestheplottellusabouttheproduct:
(x X )(y Y )

Well,ittellsusthis:
plot

Thatis,intheupperleftquadrant,thedifferencebetweenany(x,y)datapointandthex=Xlineisnegativeand
thedifferencebetweenany(x,y)datapointandthey=Ylineispositive.Therefore,any(x,y)datapointintheupperleft
quadrantproducesanegativeproduct.Nowforthelowerrightquadrant,wheremosttheremainingpointslie.Inthe
lowerrightquadrant,thedifferencebetweenany(x,y)datapointandthex=Xlineispositiveandthedifference
betweenany(x,y)datapointandthey=Ylineisnegative.Therefore,any(x,y)datapointinthelowerleftquadrantalso
producesanegativeproduct.Nowthereareafewdatapointsthatlieintheupperrightandlowerleftquadrantsthat
wouldproduceapositiveproduct.But,sincemostofthedatapointsproducenegativeproducts,thesumoftheproducts
wouldstillbenegative.Ingeneral,whenthereisanegativelinearrelationshipbetweenXandY,thesignofthe
correlationcoefficientisgoingtobenegative.Again,makesintuitivesense!

Questions#2,#3,#4

Asitturnsout,answeringthelastthreequestionsisgoingtotakeabitofpreliminaryworkbeforewearriveat
thefinalanswers.Tomakeourworkconcrete,let'ssupposethattherandomvariablesXandYhaveatrinomial
distributionwithn=2,p1=,p2=,and0x+y2.Fortrinomialrandomvariables,wetypicallyrepresent
thejointprobabilitymassfunctionasaformula.Inthiscase,let'srepresentthejointprobabilitymassfunction
asagraph:
trinomialpmf

Eachoftheblackdots()representsanelementofthejointsupportS.Asweshouldexpectwithatrinomial,
thesupportistriangular.TheprobabilitiesthatX=xandY=yareindicatedinblue.Forexample,theprobability
thatX=0andY=1is4/16.Youcanverifytheseprobabilities,ifyouaresoinclined,usingtheformulaforthe
trinomialp.m.f.Whatwewanttodohere,though,isexplorethecorrelationbetweenXandY.Now,we'llsoon
seethatwecanlearnsomethingaboutthecorrelationXY byconsideringthebestfittinglinethroughthe(x,y)
pointsinthesupport.Specifically,considerthebestfittinglinepassingthroughthepoint(X,Y).Wedon'tyet
knowwhatthebestfittinglineis,butwecould"eyeball"suchalineonourgraph.That'swhattheredlineis
here,an"eyeballed"bestfittingline:
trinomialplot

Astheplotsuggests,themeanofXisandthemeanofYis1(that'sbecauseXisbinomialwithn=2
andp1=,andYisbinomialwithn=2andp2=).Now,whatwewanttodoisfindtheformulaforthebest
(red)fittinglinepassingthroughthepoint(X,Y).Well,weknowthattwopointsdeterminealine.So,along
withthe(X,Y)point,let'spickanarbitrarypoint(x,y)ontheline:

trinomialgraph

Then,weknowthattheslopeofthelineisriseoverrun.Thatis:
slope

rise
=

y Y

=
run

= b

x X

andthelineisthereforeoftheform:
y Y

= b(x X )

ory

= Y + b(x X )

Nowtofindthebestfittingline,we'llusetheprincipleofleastsquares.Thatis,we'llfindtheslopebthat
minimizesthesquaredverticaldistancesbetweeneverypoint(x0,y0)inthejointsupportSandthepointonthe
line:
(x0 , Y + b(x0 X ))

asillustratedhereingreen:
graphofverticaldistances

Thatis,weneedtofindthebthatminimizes:
2

K (b) = E{[(Y Y ) b(X X )] }

Theresultinglineiscalledtheleastsquaresregressionline.Whatistheleastsquaresregressionline?

Solution.Beforedifferentiating,let'sstartwithsimplifyingthethingthatwearetryingtominimize:
2

K (b) = E{[(Y Y ) b(X X )] }

getting:

Now,tofindtheslopebthatminimizesK(b),theexpectedsquaredverticaldistances,weneedto
differentiateK(b)withrespecttob,andsettheresultingderivativeto0.Doingso,weget:

K (b) = 2X Y + 2b

2
X

Then,solvingforb,wefirstget:
b

2
X

= X Y

andthenfinally:
b =

Y
X

NotethatbdoesindeedminimizeK(b),becausethesecondderivativeofK(b)ispositive.Thatis:
K

(b) = 2

2
X

> 0

Now,wecansubstitutewhatwehavefoundfortheslopebintoourequation:
y = Y + b(x X )

gettingtheleastsquaresregressionline:
y = Y + (

Y
X

) (x X )

Bytheway,notethat,becausethestandarddeviationsofXandYarepositive,ifthecorrelation
coefficientXY ispositive,thentheslopeoftheleastsquareslineisalsopositive.Similarly,ifthe

correlationcoefficientXY isnegative,thentheslopeoftheleastsquareslineisalsonegative.

Nowthatwe'vefoundthebthatminimizesK(b),whatisthevalueofK(b)atitsminimumb

Solution.Substitutingb

intooursimplifiedformulaforK(b):

X
K (b) =

2
Y

2bX Y + b

2
X

weget:

K (

) =

X
=
=

2
Y

2
Y
2
Y

2 (

X
2

2
Y

) X Y + (
2

Y
X

2
X

2
Y

(1 )

Thatis:
K (

) =

2
Y

(1 )

Okay,havewelostsightofwhatwearedoinghere?Rememberthatstartedwaybackwhentryingtoanswer
threequestions.Well,allofourhardworknowmakestheanswerstothethreequestionsrather
straightforward.Let'stakealook!
Whyis1
Thatis:

XY 1

?Well,K(b)isanexpectationofsquaredterms,soK(b)isnecessarilynonnegative.

K (b) =

2
Y

(1 ) 0

AndbecausethevarianceY2 isnecessarilynonnegative,thatimpliesthat:
2

(1 ) 0

whichimpliesthat:

whichimpliesthat:

andwhichfinallyimpliesthat:
1 1

Phew!Done!Wehavenowansweredthethirdquestion.Let'snowtacklethesecondandfourth
questions.WhyisXY ameasureoflinearrelationship?AndwhydoesXY closeto1or+1indicatea
stronglinearrelationship?Well,wedefinedK(b)sothatitmeasuresthedistanceofthepoints(x0,y0)inthe
jointsupportStoaline.Therefore,XY necessarilymustconcernalinearrelationship,andnoother.

Now,wecantakeitastepfurther.ThesmallerK(b)is,thecloserthepointsaretotheline:
K(b)issmallest,0,whenXY is1or+1.Inthatcase,thepointsfallrightontheline,indicatingaperfect
linearrelationship.
K(b)islargest,Y2 ,whenXY is0.Inthatcase,thepointsfallfarawayfromtheline,indicatingaweak
linearrelationship.
So,therewehaveit!Allfourquestionsposed,andallfourquestionsanswered!Weshouldallnowhaveafairly
goodunderstandingofthevalueofknowingthecorrelationbetweentworandomvariablesXandY.
SourceURL:https://onlinecourses.science.psu.edu/stat414/node/94