All Exams Test series for 1 year @ ₹349 only
Question

If the covariance between x and y is 30, variance of x is 25 and variance of y is 144, then what is the correlation coefficient?

This question was previously asked in
NDA I 2016 GAT Previous Year Paper (17-Apr-2016)
The correct answer is

0.5

Understanding the Correlation Coefficient Calculation

The question asks us to calculate the correlation coefficient between two variables, x and y, given their covariance and variances.

The correlation coefficient, often denoted by $\rho$ (rho) or r, is a measure of the linear relationship between two variables. It ranges from -1 to +1. A value of +1 indicates a perfect positive linear relationship, -1 indicates a perfect negative linear relationship, and 0 indicates no linear relationship.

Formula for Correlation Coefficient

The formula to calculate the population correlation coefficient ($\rho_{xy}$) between two variables x and y based on their covariance and standard deviations is:

$$ \rho_{xy} = \frac{\text{Cov}(x, y)}{\sigma_x \sigma_y} $$

Where:

  • $\text{Cov}(x, y)$ is the covariance between x and y.
  • $\sigma_x$ is the standard deviation of x.
  • $\sigma_y$ is the standard deviation of y.

Remember that the standard deviation of a variable is the square root of its variance:

  • $\sigma_x = \sqrt{\text{Variance}(x)}$
  • $\sigma_y = \sqrt{\text{Variance}(y)}$

Applying the Given Data

We are provided with the following values:

  • Covariance between x and y ($\text{Cov}(x, y)$) = 30
  • Variance of x ($\text{Variance}(x)$) = 25
  • Variance of y ($\text{Variance}(y)$) = 144

Step-by-Step Calculation

Let's calculate the standard deviations first:

Step 1: Calculate the standard deviation of x ($\sigma_x$)

$$ \sigma_x = \sqrt{\text{Variance}(x)} = \sqrt{25} $$

$$ \sigma_x = 5 $$

Step 2: Calculate the standard deviation of y ($\sigma_y$)

$$ \sigma_y = \sqrt{\text{Variance}(y)} = \sqrt{144} $$

$$ \sigma_y = 12 $$

Step 3: Substitute the values into the correlation coefficient formula

$$ \rho_{xy} = \frac{\text{Cov}(x, y)}{\sigma_x \sigma_y} $$

$$ \rho_{xy} = \frac{30}{5 \times 12} $$

$$ \rho_{xy} = \frac{30}{60} $$

Step 4: Calculate the final value

$$ \rho_{xy} = 0.5 $$

Thus, the correlation coefficient between x and y is 0.5.

Let's compare this result with the given options:

Option Value
1 0.4
2 0.5
3 0.6
4 0.7

Our calculated value, 0.5, matches Option 2.

Revision Table: Key Concepts

Term Definition Formula
Covariance A measure of the joint variability of two random variables. Indicates the direction of the linear relationship. $\text{Cov}(x, y) = E[(x - E[x])(y - E[y])]$ (for populations)
Variance A measure of how spread out the data points are from the mean. The square of the standard deviation. $\text{Variance}(x) = E[(x - E[x])^2]$ (for populations)
Standard Deviation The square root of the variance. Measures the typical distance of data points from the mean. $\sigma_x = \sqrt{\text{Variance}(x)}$
Correlation Coefficient A standardized measure of the linear relationship between two variables. Ranges from -1 to +1. $\rho_{xy} = \frac{\text{Cov}(x, y)}{\sigma_x \sigma_y}$

Additional Information: Interpreting Correlation

The correlation coefficient provides insights into the relationship:

  • A value close to +1 suggests a strong positive linear relationship (as x increases, y tends to increase proportionally).
  • A value close to -1 suggests a strong negative linear relationship (as x increases, y tends to decrease proportionally).
  • A value close to 0 suggests a weak or no linear relationship. Note that a correlation of 0 does not necessarily mean the variables are independent; they could have a non-linear relationship.
  • The correlation coefficient is a dimensionless quantity, meaning it does not have any units. This makes it useful for comparing the strength of relationships between different pairs of variables.
  • In this case, a correlation coefficient of 0.5 indicates a moderate positive linear relationship between x and y.
Was this answer helpful?

Similar Questions

  1. The coefficient of correlation between ages of husband and wife at the time of marriage for a given set of 100 couples was noted to be 0.7. Assume that all these couples survive to celebrate the silver jubilee of their marriage. The coefficient of correlation at that point of time will be

  2. Two variates, x and y, are uncorrelated and have standard deviations σ xand σ yrespectively. What is the correlation coefficient between x + y and x – y?

  3. If a random variable (\(x\)) follows binomial distribution with mean 5 and variance 4, and \(5^{23}P(X = 3) = \lambda 4^{\lambda}\), then what is the value of \(\lambda\) ?
  4. Let two lines of regression be \(x + y + 11 = 0\) and \(2x + 3y + 4 = 0\) for some data. What is the value of correlation coefficient between x and y ?
  5. Consider the following statements:

    1) If the correlation coefficient r xy = 0, then the two lines of regression are parallel to each other.

    2) If the correlation coefficient r xy = + 1, then the two lines of regression are perpendicular to each other.

    Which of the above statements is/are correct?

  6. If 4x – 5y + 33 = 0 and 20x – 9y = 107 are two lines of regression, then what are the values of x̅ and y̅ respectively?

  7. The regression coefficients of a bivariate distribution are -0.64 and -0.36. Then the correlation coefficient of the distribution is

  8. Let \(x - 3y+4 = 0\) and \(2x-7y+8 = 0\) be two lines of regression computed from some bivariate data. If \(b_{yx}\) and \(b_{xy}\) are regression coefficients of lines of regression of \(y\) on \(x\) and \(x\) on \(y\) respectively, then what is the value of \(b_{xy} + 7b_{yx}\)?
  9. Which one of the following can be considered as appropriate pair of values of regression coefficient of y on x and regression coefficient of x on y?

  10. If two lines of regression are x + 4y + 1 = 0 and 4x + 9y + 7 = 0, then what is the value of x when y = -3 ?


Important Questions from Correlation and Regression

  1. For testing the significance of overall regression the test to be used is
  2. Including relevant lagged values of the dependent variable on the right hand side of a regression equation could lead to which one of the following ?
  3. If OLS is used in the presence of auto-correlation, which of the following will be likely consequences ?
    i. Coefficients estimates may be misleading.
    ii. Hypothesis tests could reach the wrong conclusions.
    iii. Forecasts made from the model could be biased.
    iv. Standard errors may be inappropriate.
  4. Regression analysis is of particular interest
  5. Which of the following can be linked with those providing method for estimating black money in India ?
    I. Kaldor’s approach
    II. NIPFP method
    III. O.P. Chopra’s method
    IV. Arjun Sengupta
    Codes :
Need Expert Advice?
Test Series
NDA img
Defence
NDA 2026 Mock Test Series (Latest Pattern)
526 Tests 1 Tests Free
1175 Attempts
4.7(160)
English, Hindi

Start Your Preparation with Prepp Mobile App

Download the app from Google Play & App Store
Download the app from Google Play & App Store
Prepp Mobile App