Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Forecasting (correlation coefficients)
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- July 5, 2019 at 7:42 am #521921
The following question asks which correlation coefficient best describes the relationship between x and y without carrying out any calculations. So how can one know that by just looking at them and not performing any calculations. Also can regression analysis formula be used in the following question to calculate the correlation coefficient.
Question: The following four data have been obtained: (1,5), (2,6), (4,9),(5,11). Without carrying out any calculations, which of the following correlation coefficients best describes the relationship between x and y?
A) -0.98
B) -0.25
C) 0.98
D) 0.25July 5, 2019 at 9:08 am #521948Firstly, it is clear that both variables are increasing each time. Therefore the are positively correlated and the correlation coefficient must therefore be positive. So the answer has to be C or D.
Secondly, just by looking at the two variables, it is clear that they are moving pretty closely together and therefore the correlation coefficient must be closer to 1 than to 0.
Therefore the answer must be C.Obviously you can use the formula to calculate the coefficient, but you will not have time in the exam is there is no need to.
You really should watch my free lectures on this, because it is all explained in the lectures. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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