16.7. Applications in Engineering

Try these first

1. 1.

   What is covariance?

   Hint

   Think about how changes in one variable relate to changes in another.

2. 2.

   What value range does correlation fall in?

   Hint

   Consider the telling extremes of a relationship.

3. 3.

   What does a positive covariance indicate?

   • Inverse relationship
   • Positive relationship
   • No relationship

   Hint

   Think about how two variables can move together.

4. 4.

   Correlation values range from:

   • True
   • False

   Hint

   Recall the extremes of correlation.

5. 5.

   Given two datasets from two different production lines, X = {10, 20, 30} and Y = {5, 15, 25}, calculate the covariance and interpret its meaning.

   Hint

   Consider the means of both data sets.

6. 6.

   In a financial portfolio, if Asset A has a return of {2, 3, 4} and Asset B has a return of {1, 5, 10}, evaluate and interpret the correlation.

   Hint

   Your calculations should reflect their connectedness in terms of risk and return.