Correlation

This article is about the correlation coefficient between two variables. The term correlation can also mean the cross-correlation of two functions or electron correlation in molecular systems.

In probability theory and statistics, correlation, also called correlation coefficient, indicates the strength and direction of a linear relationship between two random variables. In general statistical usage, correlation or co-relation refers to the departure of two variables from independence, although correlation does not imply causation. In this broad sense there are several coefficients, measuring the degree of correlation, adapted to the nature of data.

A number of different coefficients are used for different situations. The best known is the Pearson product-moment correlation coefficient, which is obtained by dividing the covariance of the two variables by the product of their standard deviations. Despite its name, it was first introduced by Francis Galton.

Pearson's product-moment coefficient

Mathematical properties

The correlation ρ_{X, Y} between two random variables X and Y with expected values μ_X and μ_Y and standard deviations σ_X and σ_Y is defined as:

\rho _{X,Y}={\mathrm {cov} (X,Y) \over \sigma _{X}\sigma _{Y}}={E((X-\mu _{X})(Y-\mu _{Y})) \over \sigma _{X}\sigma _{Y}},

where E is the expected value of the variable and cov means covariance. Since μ_X = E(X), σ_X² = E(X²) − E²(X) and likewise for Y, we may also write

\rho _{X,Y}={\frac {E(XY)-E(X)E(Y)}{{\sqrt {E(X^{2})-E^{2}(X)}}~{\sqrt {E(Y^{2})-E^{2}(Y)}}}}.

The correlation is defined only if both of the standard deviations are finite and both of them are nonzero. It is a corollary of the Cauchy-Schwarz inequality that the correlation cannot exceed 1 in absolute value.

The correlation is 1 in the case of an increasing linear relationship, −1 in the case of a decreasing linear relationship, and some value in between in all other cases, indicating the degree of linear dependence between the variables. The closer the coefficient is to either −1 or 1, the stronger the correlation between the variables.

If the variables are independent then the correlation is 0, but the converse is not true because the correlation coefficient detects only linear dependencies between two variables. Here is an example: Suppose the random variable X is uniformly distributed on the interval from −1 to 1, and Y = X². Then Y is completely determined by X, so that X and Y are dependent, but their correlation is zero; they are uncorrelated. However, in the special case when X and Y are jointly normal, independence is equivalent to uncorrelatedness.

A correlation between two variables is diluted in the presence of measurement error around estimates of one or both variables, in which case disattenuation provides a more accurate coefficient .

The sample correlation

If we have a series of n measurements of X and Y written as x_i and y_i where i = 1, 2, ..., n, then the Pearson product-moment correlation coefficient can be used to estimate the correlation of X and Y . The Pearson coefficient is also known as the "sample correlation coefficient". It is especially important if X and Y are both normally distributed. The Pearson correlation coefficient is then the best estimate of the correlation of X and Y . The Pearson correlation coefficient is written:

r_{xy}={\frac {\sum (x_{i}-{\bar {x}})(y_{i}-{\bar {y}})}{(n-1)s_{x}s_{y}}},

where ${\bar {x}}$ and ${\bar {y}}$ are the sample means of x_i and y_i , s_x and s_y are the sample standard deviations of x_i and y_i and the sum is from i = 1 to n. As with the population correlation, we may rewrite this as

r_{xy}={\frac {n\sum x_{i}y_{i}-\sum x_{i}\sum y_{i}}{{\sqrt {n\sum x_{i}^{2}-(\sum x_{i})^{2}}}~{\sqrt {n\sum y_{i}^{2}-(\sum y_{i})^{2}}}}}.

Again, as is true with the population correlation, the absolute value of the sample correlation must be less than or equal to 1. Though the above formula conveniently suggests a single-pass algorithm for calculating sample correlations, it is notorious for its numerical instability (see below for something more accurate).

The square of the sample correlation coefficient, which is also known as the coefficient of determination, is the fraction of the variance in y_i that is accounted for by a linear fit of x_i to y_i . This is written

r_{xy}^{2}=1-{\frac {\sigma _{y|x}^{2}}{\sigma _{y}^{2}}},

where σ_y|x² is the square of the error of a linear regression of x_i on y_i by the equation y = a + bx:

\sigma _{y|x}^{2}={\frac {1}{n-1}}\sum _{i=1}^{n}(y_{i}-a-bx_{i})^{2},

and σ_y² is just the variance of y:

\sigma _{y}^{2}={\frac {1}{n-1}}\sum _{i=1}^{n}(y_{i}-{\bar {y}})^{2}.

Note that since the sample correlation coefficient is symmetric in x_i and y_i , we will get the same value for a fit of x_i to y_i :

r_{xy}^{2}=1-{\frac {\sigma _{x|y}^{2}}{\sigma _{x}^{2}}}.

This equation also gives an intuitive idea of the correlation coefficient for higher dimensions. Just as the above described sample correlation coefficient is the fraction of variance accounted for by the fit of a 1-dimensional linear submanifold to a set of 2-dimensional vectors (x_i , y_i ), so we can define a correlation coefficient for a fit of an m-dimensional linear submanifold to a set of n-dimensional vectors. For example, if we fit a plane z = a + bx + cy to a set of data (x_i , y_i , z_i ) then the correlation coefficient of z to x and y is

r^{2}=1-{\frac {\sigma _{z|xy}^{2}}{\sigma _{z}^{2}}}.

Geometric Interpretation of correlation

The correlation coefficient can also be viewed as the cosine of the angle between the two vectors of samples drawn from the two random variables.

Caution: This method only works with centered data, i.e., data which have been shifted by the sample mean so as to have an average of zero. Some practitioners prefer an uncentered (non-Pearson-compliant) correlation coefficient. See the example below for a comparison.

As an example, suppose five countries are found to have gross national products of 1, 2, 3, 5, and 8 billion dollars, respectively. Suppose these same five countries (in the same order) are found to have 11%, 12%, 13%, 15%, and 18% poverty. Then let x and y be ordered 5-element vectors containing the above data: x = (1, 2, 3, 5, 8) and y = (0.11, 0.12, 0.13, 0.15, 0.18).

By the usual procedure for finding the angle between two vectors (see dot product), the uncentered correlation coefficient is:

\cos \theta ={\frac {{\mathbf {x}}\cdot {\mathbf {y}}}{\left\|{\mathbf {x}}\right\|\left\|{\mathbf {y}}\right\|}}={\frac {2.93}{{\sqrt {103}}{\sqrt {0.0983}}}}=0.920814711.

Note that the above data were deliberately chosen to be perfectly correlated: y = 0.10 + 0.01 x. The Pearson correlation coefficient must therefore be exactly one. Centering the data (shifting x by E(x) = 3.8 and y by E(y) = 0.138) yields x = (-2.8, -1.8, -0.8, 1.2, 4.2) and y = (-0.028, -0.018, -0.008, 0.012, 0.042), from which

\cos \theta ={\frac {{\mathbf {x}}\cdot {\mathbf {y}}}{\left\|{\mathbf {x}}\right\|\left\|{\mathbf {y}}\right\|}}={\frac {0.308}{{\sqrt {30.8}}{\sqrt {0.00308}}}}=1,

as expected.

Interpretation of the size of a correlation

Correlation	Negative	Positive
Small	−0.29 to −0.10	0.10 to 0.29
Medium	−0.49 to −0.30	0.30 to 0.49
Large	−1.00 to −0.50	0.50 to 1.00

Several authors have offered guidelines for the interpretation of a correlation coefficient. Cohen (1988),^[1] for example, has suggested the following interpretations for correlations in psychological research, in the table on the right.

As Cohen himself has observed, however, all such criteria are in some ways arbitrary and should not be observed too strictly. This is because the interpretation of a correlation coefficient depends on the context and purposes. A correlation of 0.9 may be very low if one is verifying a physical law using high-quality instruments, but may be regarded as very high in the social sciences where there may be a greater contribution from complicating factors.

Non-parametric correlation coefficients

Pearson's correlation coefficient is a parametric statistic, and it may be less useful if the underlying assumption of normality is violated. Non-parametric correlation methods, such as Chi-square, Point biserial correlation, Spearman's ρ and Kendall's τ may be useful when distributions are not normal; they are a little less powerful than parametric methods if the assumptions underlying the latter are met, but are less likely to give distorted results when the assumptions fail.

Other measures of dependence among random variables

To get a measure for more general dependencies in the data (also nonlinear) it is better to use the correlation ratio which is able to detect almost any functional dependency, or mutual information/total correlation which detect even more general dependencies.

Copulas and correlation

The information given by a correlation coefficient is not enough to define the dependence structure between random variables; to fully capture it we must consider the copula between them. The correlation coefficient completely defines the dependence structure only in very particular cases, for example when the cumulative distribution functions are elliptic (as with, for example, the multivariate normal distribution).

Correlation matrices

The correlation matrix of n random variables X₁, ..., X_n is the n × n matrix whose i,j entry is corr(X_i, X_j). If the measures of correlation used are product-moment coefficients, the correlation matrix is the same as the covariance matrix of the standardized random variables X_i /SD(X_i) for i = 1, ..., n. Consequently it is necessarily a non-negative definite matrix.

The correlation matrix is symmetrical (the correlation between $X_{i}$ and $X_{j}$ is the same as the correlation between $X_{j}$ and $X_{i}$ ).

Common misconceptions about correlation

Correlation and causality

The conventional dictum that "correlation does not imply causation" is a logical argument against using correlation to infer a direct causal relationship among the variables. This dictum should not be taken to mean that correlations cannot indicate causal relations. However, the causes underlying the correlation may be indirect and unknown. Consequently, establishing a correlation between two variables is necessary but not sufficient to establishing a causal relationship (in either direction).

A correlation between age and height is fairly causally transparent, but a correlation between mood and health might be less so. Does improved mood lead to improved health? Or does good health lead to good mood? Or does some other factor underlie both? In other words, a correlation can be taken as evidence for a causal relationship, but cannot indicate precisely what the causal relationship might be.

Correlation and linearity

Four sets of data with the same correlation of 0.81, as described by F. Anscombe.

While Pearson correlation indicates the strength of a linear relationship between two variables, its value alone may not be sufficient to evaluate this relationship, especially in the case where the assumption of normality is incorrect.

The image on the right shows scatterplots of four different pairs of variables, first described by Francis Anscombe.^[2] The four $y$ variables have the same mean (7.5), standard deviation (4.12), correlation (0.81) and regression line ( $y=3+0.5x$ ). However, as can be seen on the plots, the distribution of the variables is very different. The first one (top left) seems to be distributed normally, and corresponds to what one would expect when considering two variables correlated and following the assumption of normality. The second one (top right) is not distributed normally; while an obvious relationship between the two variables can be observed, it is not linear, and the Pearson correlation coefficient is not relevant. In the third case (bottom left), the linear relationship is perfect, except for one outlier which exerts enough influence to lower the correlation coefficient from 1 to 0.81. Finally, the fourth example (bottom right) shows another example when one outlier is enough to produce a high correlation coefficient, even though the relationship between the two variables is not linear.

These examples indicate that the correlation coefficient, as a summary statistic, can not replace the individual examination of the data.

Computing correlation accurately in a single pass

The following algorithm (in pseudocode) will estimate correlation with good numerical stability

sum_sq_x = 0
sum_sq_y = 0
sum_coproduct = 0
mean_x = x[1]
mean_y = y[1]
for i in 2 to N:
    sweep = (i - 1.0) / i
    delta_x = x[i] - mean_x
    delta_y = y[i] - mean_y
    sum_sq_x += delta_x * delta_x * sweep
    sum_sq_y += delta_y * delta_y * sweep
    sum_coproduct += delta_x * delta_y * sweep
    mean_x += delta_x / i
    mean_y += delta_y / i 
pop_sd_x = sqrt( sum_sq_x / N )
pop_sd_y = sqrt( sum_sq_y / N )
cov_x_y = sum_coproduct / N
correlation = cov_x_y / (pop_sd_x * pop_sd_y)

For an enlightening experiment, check the correlation of {900,000,000 + i for i=1...100} with {900,000,000 - i for i=1...100}, perhaps with a few values modified. Poor algorithms will fail.

Notes and references

^ Cohen, J. (1988). Statistical power analysis for the behavioral sciences (2nd ed.) Hillsdale, NJ: Lawrence Erlbaum Associates. ISBN 0-8058-0283-5.
^ Anscombe, Francis J. (1973) Graphs in statistical analysis. American Statistician, 27, 17–21.

External links

Understanding Correlation - Introductory material by a U. of Hawaii Prof
Statsoft Electronic Textbook
Pearson's Correlation Coefficient - How to calculate it fast
Learning by Simulations - The distribution of the correlation coefficient
META STATISTICS PORTAL. Comparative international Statistics. Access to Data Sources around the Globe OECD Statistics, U.S. Data Sources, Census Bureau, White House, Eurostat, Penn World Tables, Groningen Development Centre Database, Economics Web Institute Stats, Pacific Exchange Rate Service etc.

[Cohen88-1] Cohen, J. (1988). Statistical power analysis for the behavioral sciences (2nd ed.) Hillsdale, NJ: Lawrence Erlbaum Associates. ISBN 0-8058-0283-5.

[2] Anscombe, Francis J. (1973) Graphs in statistical analysis. American Statistician, 27, 17–21.

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