The correlation coefficient is a statistical measure of the strength of the relationship between the relative movements of two variables.
The significance of the correlation coefficient is to decide whether the linear relationship in the sample data is strong enough to use to model the relationship in the population.
Formula to calculate correlation coefficient.
- r = correlation coefficient
- n = number of observations
- x = 1st variable in the context
- y = 2nd variable
Example:
Suppose you were given a set of data where n = 5 and you calculated to get the following:
Σx = 20
Σy = 30
Σxy = 2,500
Σx^2 = 2,000
Σ y^2 = 3,000
Calculate the correlation coefficient.
Therefore, your correlation coefficient is 0.0455.
