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Correlation — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsCorrelation6 Marks
Question
Name various methods of studying correlation. Describe any one.
✓

Answer

Various methods of studying correlation are:
  1. Scatter diagram
  2. Karl Pearson's coefficient of correlation
  3. Spearman's Rank Correlation
Now explaining one of them:
Spearman's Rank Correlation: Prof. Charles Spearman (British psychologist), developed this method as computing coefficient of correlation in 1904. It is based on the ranking of various values in the variables.
This method is known as Spearman's Rank Difference method.
It is useful in cases when quantitative measure for certain factors such as, intelligence, beauty, honesty, etc. is not possible. The process of calculating the rank correlation is as follow:
  1. Give ranks to various items of the two series (if ranks are not given)
  2. Find differences of the ranks and denote them by D.
  3. Square that differences and denote them by D2 to obtain EDP
  4. Apply the following formula:
$\text{r}_\text{s}=1-\frac{6\Sigma\text{D}^2}{\text{N}^3-\text{N}}.$

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