Correlation refers to the idea that two variables (x and y) impact each other. For instance, the grades in a statistics class may be related to, or correlated with the amount of time those students study. As study time goes up, grades go up. This would be a positive correlation. On the other hand, as time spent partying, grades go down. This is called a negative correlation.
A positive correlation doesn’t strictly refer to good things, though. As the percent of poverty in a community goes up, the amount of crime may also go up. This is a positive correlation, but certainly not a good thing!
Correlations are expressed from -1 (which is perfectly negative) and +1 (which is perfectly positive.) The number shows the strength, and the sign (positive or negative) shows the direction. Therefore, -0.75 is a stronger correlation (or connection) than 0.25.
One common expression is “Correlation is not causation”; this refers to the idea that items can be correlated without really being related to each other. For instance, there is a close connection between the rates of ice-cream consumption in the winter and the drowning rate, even though one really doesn’t affect the other.
How to Calculate Correlation
Pearson’s r (also known as the correlation coefficient) is a simple correlation tool to work with. (Technically the r is used for samples and p is used for populations, but we’ll be working with samples, a limited amount of the total so we will simply refer to it as Pearson’s r or r.)
The formula is here:
This formula may look complicated, but let’s step through it step by step.
The sum of the values of X subtracted from the mean of X multipled by the values of Y subtracted from the mean of Y divided by the square root of X subtracted from the mean of X-squared multiplied by Y subtracted from the mean of Y-squared.
Let’s look at the following set of data of student absences and their final grades:
|Student #||Absences||Exam Grade|
This shows a moderately negative correlation, as absences go up, grades go down.
Moving to the equation, let’s look at the top part fist:
We have to calculate the mean of X and the mean of Y:
4 + 2 + 2 + 3 + 1 + 0 + 4 + 8 + 7 + 3 = 34 / 10 = Mean of X of 3.4
82 + 98 + 76 + 68 + 84 + 99 + 67 + 58 + 50 + 78 = 760 / 10 = Mean of Y of 76.
Next, we calculate X-Mx and Y-My, and sum them up.
|X||X – Mx||Y||Y – My|
Next, we must multiply the values of each of these together:
|X – Mx||Y – My||X-Mx * Y-My|
And the sum of these (3.6 + -30.8 + 0 + 3.2 and so on) is -304. Here’s our equation so far:
|X||X – Mx||(X-Mx)2||Y||Y – My||(Y-My)2|
We take the square of each of the X values and sum them up. We do the same for the Y values.
This results in: -304 / Sqrt(56.4*2262)
Next, we multiply the two bottoms together. 56.4 x 2262 = 127,576.8.
Taking the square root yields 357.179.
Our final calculation is -304 / 357.179 which equals -0.85.
-0.85 is our final correlation, which we can confirm using Excel’s CORREL function.