Relationship Analysis

In business or business related situations multiple variables with respect to customers or companies exist it becomes critical to understand, establish the relationship between the variables for example a relationship between amounts spent on advertisement and sales could be critical. The relationship between income, age of the customers and bill amount per visit could be critical to a chain of retail. Relationship analysis when the data is qualitative: When the data is qualitative cross tabs, Chi-Square Tests are used primarily to understand the relationships. For example to understand the relationship between occupation and defaulting nature of customers one can use Cross Tabs and Chi-Square Tests. When the data is quantitative or numeric: When the data is quantitative relationship analysis is performed by: 1. Scatter Diagram 2. Karl Pearsons Coefficient of Correlation or Product moment correlation. 3. Spearmans Rank Correlation or Rank Correlation 4. Regression Represent the following data as a Scattered diagram and comment on the Correlation.
X 10 15 19 21 25 30 32 35 Y 60 64 71 78 82 85 90 91

Y
100 90 80 70 60 50 40 30 20 10 0 0 10 20 30 40

Y Linear (Y)

From the scatter Diagram One can observe that there is +ve correlation in the data. Which indicates that behavior of X & Y is same i.e. either both increasing or both decreasing. Identifying correlation by scatter Diagram: Scatter Diagram for a data is obtained by taking values of X on X-Axis and of Y on Y-Axis, the correlation is identified as follows: 1. Perfect positive correlation: Two Variable X & Y said to have perfect +ve correlation if both increasing or both decreasing in proportion. The behavior of both the variables is same. If variables have Perfect positive correlation then their scatter diagram is as follows:

y
7 6 5 4 3 2 1 0 0 2 4 6 8 10 y

2. Positive Correlation: Two variable X & Y are said to have +ve correlation if one increase then the other also increases, if one decreases other also decreases. If two variables have Positive correlation then their scatter diagram is as follows:

Y
100 90 80 70 60 50 40 30 20 10 0 0 10 20 30 40

Y Linear (Y)

3. Perfect Negative Correlation: Two variable X & Y are said to have -ve correlation if one increase the other decreases if one decreases the other increase in propotion. If two variables have Perfect Negative correlation then their scatter diagram is as follows:

y
7 6 5 4 3 2 1 0 0 2 4 6 8 10 y

4. Negative Correlation: Two variable X & Y are said to have -ve correlation if one increase the other decreases if one decreases the other increase. If two variables have Perfect Negative correlation then their scatter diagram is as follows:

y
7 6 5 4 3 2 1 0 0 2 4 6 8 10 y

If the scatter diagram is none of the above then data said to have no correlationthe scatter diagram mabe as follows: