Question

In: Statistics and Probability

7) COVARIANCE AND CORRELATION COEFFICIENT. What is covariance? How is covariance and correlation coefficients linked? How...

7) COVARIANCE AND CORRELATION COEFFICIENT. What is covariance? How is covariance and correlation coefficients linked? How does the concept of covariance link to the Timura depiction of an efficient frontier oriented “silver bullet” In addition, draw a graphic that explains your thinking using real estate, international, private equity, venture capital, etc.

Solutions

Expert Solution

Covariance:

It is an analysis of how much 2 random variables vary together. It is very much similar to variance. But, variance normally determines that how a single variable varies and on the other hand, covariance determines how 2 variables vary together.

Formula:

Correlation:

Correlation is an analysis that normally analyses the strength of association between 2 variables and also the direction of the relationship. The strength of relationship normally varies between +1 and -1. If the value is 0, then it means that there doesn't exists any relationship between the variables. If the correlation is close to 1 and is positive it signifies that there is a positive strong relationship between the variables. Here if one variable increases then the other also increases. On the other hand if the value is close to -1, it represents a negative strong relationship between the variables.

Formula:

Relationship between correlation and covariance...

For the second part, the question was not clear to us... Can you please elaborate what is your query or else give us a data set so that we can do the analysis for you...


Related Solutions

Calculate the covariance and correlation coefficients by completing the below table, assuming sample data. Show all...
Calculate the covariance and correlation coefficients by completing the below table, assuming sample data. Show all workings. (Note: You can calculate the mean and standard deviation of X & Y with Excel or your calculator; no working for their calculation is required.) X Y (X - X bar) (Y - Y bar) (X - X bar)(Y - Y bar) 5 5 2 3 5 4 8 7 6 9 (b)       Comment on the direction and strength of the association between X...
6. Measures of linear relationship - Covariance and coefficient of correlation Consider a data set consisting...
6. Measures of linear relationship - Covariance and coefficient of correlation Consider a data set consisting of observations for three variables: x, y, and z. Their sample means, variances, and standard deviations are shown in Table 1. Table 1 Sample Mean x̄ x̄ = 4 ȳ ȳ = 5 z̄ z̄ = 5 Sample Variance sx2sx2 = 4 sy2sy2 = 3 sz2sz2 = 9 Sample Standard Deviation sxsx = 2 sysy = 1.732 szsz = 3 Table 2 shows the...
Explain Covariance and correlation.
Explain Covariance and correlation.
Discuss how the coefficient of determination and the coefficient of correlation are related and how they...
Discuss how the coefficient of determination and the coefficient of correlation are related and how they are used in regression analysis. 200 words
Discuss how the coefficient of determination and the coefficient of correlation are related. How are they...
Discuss how the coefficient of determination and the coefficient of correlation are related. How are they used in regression analysis? A seasonal index may be less than one, equal to one, or greater than one. Explain what each of these values mean.
what is the significance of covariance and oefficient of correlation in understanding the data
what is the significance of covariance and oefficient of correlation in understanding the data
6. What is the difference between the correlation coefficient and ?2? Why should the correlation coefficient...
6. What is the difference between the correlation coefficient and ?2? Why should the correlation coefficient be -1 and 1? 7. What is the utility of marginal effects in regression models? How are they obtained? 8. What is heterocedasticity and homocedasticity? Explain how to detect and correct the first.
Using excel compute correlation coefficients, correlation matrix and test the significance of the correlation coefficients between...
Using excel compute correlation coefficients, correlation matrix and test the significance of the correlation coefficients between sales with price,  sales with advertisments using alpha 0.05 Sales Price Adver 19.98 14.10 15.19 19.98 18.65 15.19 19.98 18.65 13.87 19.98 18.65 12.83 19.98 18.65 13.16 19.98 18.65 15.19 19.98 18.65 13.92 20.10 18.73 14.42 20.12 18.75 13.83 20.13 18.75 14.50 20.14 18.75 13.87 20.12 18.75 13.64 20.12 13.87 14.31 20.13 14.27 13.85 20.14 18.76 14.20 20.14 18.77 13.64 20.13 13.87 14.33 20.13 14.14...
Identify the strength ("weak" "moderate" "strong") and direction ("positive" "negative") of the correlation coefficients. Coefficient Strength...
Identify the strength ("weak" "moderate" "strong") and direction ("positive" "negative") of the correlation coefficients. Coefficient Strength Direction +.09 –.87 +.59
a. Describe what the Pearson correlation coefficient is and what the coefficient of determination is. compare...
a. Describe what the Pearson correlation coefficient is and what the coefficient of determination is. compare it to a real world example or a example problem
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT