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Association between
Quantitative Variables
Chapter 6
6.1 Scatterplots
Is household natural gas consumption
associated with climate?

Annual household natural gas consumption
measured in thousands of cubic feet (MCF)

Climate as measured by the National Weather
Service using heating degree days (HDD)

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6.1 Scatterplots
Association between Numerical Variables

A graph displaying pairs of values as points on a
two-dimensional grid

The explanatory variable is placed on the x-axis

The response variable is placed on the y-axis
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6.1 Scatterplots
Scatterplot of Natural Gas Consumption (y)
versus Heating Degree-Days (x)


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6.2 Association in Scatterplots
Visual Test for Association

Compare the original scatterplot to others
that randomly match the coordinates

If you can pick the original out as having a
pattern, then there is an association




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6.2 Association in Scatterplots
Describing Association

1. Direction. Does it trend up or down?
2. Curvature. Is the pattern linear or curved?
3. Variation. Are the points tightly clustered
around the trend?
4. Outliers. Is there something unexpected?



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6.2 Association in Scatterplots
Gas Consumption vs. Heating Degree Days

1. Direction: Positive.
2. Curvature: Linear.
3. Variation: Considerable scatter.
4. Outliers: None apparent.



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6.3 Measuring Association
Covariance



A measure that quantifies the linear
association
Depends on units of measurement and is
therefore difficult to interpret

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1 1 2 2
cov( , )
1
n n
x x y y x x y y x x y y
x y
n

6.3 Measuring Association

Correlation (r)



Standardized measure of the strength of
the linear association (has no units)
Always between -1 and +1
Easy to interpret



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cov( , )
corr( , )
x y
x y
x y
S S

6.3 Measuring Association

Gas Consumption and Heating Degree Days

Cov (HDD, Gas) = 63,357 HDD X MCF

Corr (HDD, Gas) = 0.55

The association is positive and moderate.





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6.3 Measuring Association
Scatterplot for r = 1






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6.3 Measuring Association
Scatterplot for r = -0.95








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6.3 Measuring Association
Scatterplot for r = 0.75






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6.3 Measuring Association
Scatterplot for r = -0.50






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6.3 Measuring Association
Scatterplot for r = 0






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6.3 Measuring Association
Correlation Matrix

A table showing all of the correlations among
a set of numerical variables.






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6.4 Summarizing Association with a Line
Expressed using z-scores


Slope-Intercept Form







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x
z rz

y a bx
and /
y x
a y bx b rs s
6.4 Summarizing Association with a Line
Line Relating Gas Consumption (y) to
Heating Degree Days (x)










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x y 0126 . 0 6 . 42

6.4 Summarizing Association with a Line
Lines and Prediction
Use the correlation line to customize an ad for
estimated savings from insulation based on
climate.
For a home in a cold climate (HDD = 8,800), the
predicted gas consumption is 154 MCF.
At $10 / MCF, the predicted cost is $1,540.
Assuming that insulation saves 30% on gas bill,
estimated savings is $462.












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6.5 Spurious Correlation
Lurking Variables

Scatterplots and correlation reveal
association, not causation

Spurious correlations result from underlying
lurking variables











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6.5 Spurious Correlation
Checklist: Covariance and Correlation

Numerical variables
No obvious lurking variables
Linear
Outliers











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4M Example 6.1:
LOCATING A NEW STORE
Motivation

Is it better to locate a new retail outlet far
from competing stores?
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4M Example 6.1:
LOCATING A NEW STORE
Method

Is there an association between sales at the retail
outlets and distance to nearest competitor? For
55 stores in the chain, data are gathered for total
sales in the prior year and distance in miles from
the nearest competitor.
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4M Example 6.1:
LOCATING A NEW STORE
Mechanics





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4M Example 6.1:
LOCATING A NEW STORE
Mechanics

Compute the correlation between sales and
distance to be r = 0.741







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4M Example 6.1:
LOCATING A NEW STORE
Message

The data show a strong, positive linear association
between distance to the nearest competitor and
sales. It is better to locate a new store far from its
competitors.
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Best Practices

To understand the relationship between two
numerical variables, start with a scatterplot.

Look at the plot, look at the plot, look at the plot.

Use clear labels for the scatterplot.



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Best Practices (Continued)
Describe a relationship completely.

Consider the possibility of lurking variables.

Use a correlation to quantify the association
between two numerical variables that are linearly
related.



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Pitfalls
Dont use the correlation if data are categorical.

Dont treat association and correlation as
causation.

Dont assume that a correlation of zero means
that the variables are not associated.

Dont assume that a correlation near -1 or +1
means near perfect association.
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