Correlation analysis is used to show the strength of the relationship between two variables. Coefficient of correlation shows the strength and the direction of the relationship between variables. The coefficient of correlation is one of the most widely utilized and abused statistical measure. The abuse comes in the sense that people sometimes overlook the fact that it measures nothing but the strength of a linear link and does not mean a cause-effect relationship. The correlation is computed by use of a mathematical formula where we obtain values ranging from -1< r < +1. Whereby r is the correlation coefficient. Standard error of estimate measures the accuracy of prevision made using a regression line. A regression line shows the relationship between the explained and explanatory variables.
The relationship between a coefficient of correlation and a standard error of estimated can be explained using scatter diagrams. A scatter diagram a graph where two variables, explained and explanatory variables are plotted against each other with and a pattern of data points is obtained. Where the pattern reveals that the data points are close to each other, the correlation between the two variables is said to be stronger. Where the data points are sparsely scattered, the correlation between the two variables is said to be weak. The standard error of estimate can also be explained using the scatter diagrams. When the data points are close to the regression line, the standard error is minimal. When the data points are far away from the regression line, the standard error is greater.
Coefficient of correlation shows if there is positive, negative or no correlation between the variables similarly the standard error of estimate shows by how much the sample mean deviates from the true population mean.
In what way has the learning from this course helped you to effectively test hypotheses, draw conclusions, and provide recommendations to management? Consider what you have achieved in year team project conducted for this course.
A hypothesis is an assumption about a population parameter, which might true or false. To verify the validity this assumption, formal procedures are used which are known as hypothesis tests. These tests help to either accept or reject the hypothesis. Twos statements are obtained that the null and the alternative hypothesis. The two statements must be mutually independent and exhaustive, that is, if one is true the other statement must be false. To either accept or reject the hypothesis we use statistical tests such as Z and t test. From these tests and the significance values that are provided we either accept or reject the null hypothesis depending on the test statistic used, then a conclusion is made depending on whether the hypothesis statement was accepted or rejected. It is from these conclusions that recommendations are drawn and given to the management, such as whether or not to accept a project. The course effectively gives knowledge on how to formulate a valid hypothesis. It also gives the knowledge to correctly test the hypothesis using the correct hypothesis tests and a formula based on the sample size of the population and the population distribution type from which the data has been obtained. A valid hypothesis leads to correct and reliable conclusions. Since the recommendations are drawn from the conclusion, the recommendations will also be reliable.
Through the team project, skills such data collection, sampling, analyzing, hypothesis formulation is obtained. It is through the hypothesis formulation and testing that am able to come up with new theories, nullify the existing theories, or even improve some theories. The project has exposed me to the challenges faced during data collection, interpretation and analysis and how to effectively deal with the challenges. The coefficient of correlation has helped me garner knowledge on understanding certain economic behaviors. It has given me the knowledge of locating very important variables on which other rely. It has also aided in making me understand the connection by which certain disturbances spread and maybe interpret how the right paths can be sought from the relations. It has expounded my knowledge on relationships.
Works Cited
Sharma, A. K. (2005). Text Book Of Correlations And Regression. Discovery Publishing House.
