16. Covariance and Correlation
Covariance and correlation are pivotal statistical tools that assess the relationship between two random variables, measuring how the changes in one are associated with changes in another. Covariance indicates the direction of the relationship, whereas correlation standardizes this measure, providing insights into the strength and nature of the relationship. These concepts are crucial in fields like data analysis, engineering, and other areas involving complex interactions among variables.
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What we have learnt
- Covariance measures how two variables change together.
- Correlation standardizes covariance, making the relationship strength interpretable.
- Covariance may be positive, negative, or zero, while correlation ranges from -1 to 1.
Key Concepts
- -- Covariance
- A measure of the joint variability of two random variables, which can be positive, negative, or zero.
- -- Correlation
- A standardized form of covariance that ranges from -1 to 1, giving insight into the strength and direction of the linear relationship between variables.
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