Thursday, December 17, 2015

How To... Calculate Pearson's Correlation Coefficient (r) by Hand

Throughout last semester I have been creating videos to show my students how to calculate the various test statistics that we learn about in the Business Data Analysis module. One of the more interesting statistical tests is to determine if there is a correlation between two sets of data - it's easier to understand than (say) an Analysis of Variance (ANOVA). Despite this, many students avoid this question in my exams as it is perceived to be more difficult than it is, and to take a long time.

The test statistic is Pearson's Correlation Coefficient (r). If you know and can read the formula, all it takes is to know the sequence and shortcuts to make a correct calculations. There is a lot of pressing buttons on a calculator, but practice can definitely make perfect here. Students can use this to learn the method, and they can quickly add the same data to an Excel spreadsheet and use the Data Analysis Toolpak to check their answer. Hopefully, this video will go a long way towards taking the fear out of this statistical test.

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