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I don't understand the relationship between "Yesterday's closing price and the price one year ago". How is the answer "yes". Please help.
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I don't understand the relationship between "Yesterday's closing price and the price one year ago". How is the answer "yes". Please help.
­Because according to the rule of correlation the majority of the elements can only show either a positive or negative correlation. Here also, there are 4 points that are directly positively corelated, that is why it is considered as positive correlation between the 2 variabes and the the elements that are in minority and are negatively correlated in this question are called outliers.
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Madhvendrasinh

ANARA89
I don't understand the relationship between "Yesterday's closing price and the price one year ago". How is the answer "yes". Please help.
­Because according to the rule of correlation the majority of the elements can only show either a positive or negative correlation. Here also, there are 4 points that are directly positively corelated, that is why it is considered as positive correlation between the 2 variabes and the the elements that are in minority and are negatively correlated in this question are called outliers.
­So if a third value in the table was negatively correlated, making 3 points positively correlated and 3 negatively correlated, would that mean that the relation overall is negatively correlated?
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darthvader20

Madhvendrasinh

ANARA89
I don't understand the relationship between "Yesterday's closing price and the price one year ago". How is the answer "yes". Please help.
­Because according to the rule of correlation the majority of the elements can only show either a positive or negative correlation. Here also, there are 4 points that are directly positively corelated, that is why it is considered as positive correlation between the 2 variabes and the the elements that are in minority and are negatively correlated in this question are called outliers.
­So if a third value in the table was negatively correlated, making 3 points positively correlated and 3 negatively correlated, would that mean that the relation overall is negatively correlated?
­In that case,
there is no correlation between variables. Beacause there is no clear relation, half is positive and half is negative, it can be literally anything in the next element.
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This is another question: https://gmatclub.com/forum/the-table-gi ... 30451.html,

Where KarishmaB has explained that there is no positive correlation between the two columns as there is inconsistency(sometimes increases and sometimes decreases). If we apply the same logic here, our answer for second question is incorrect.

My take would be that if you see more increases than decreases, then select +ve correlation. In majority of the questions, this holds true. There could be one off question where this logic won't work, but I will use the one which works for majority of questions

chetan2u KarishmaB would like to hear your thoughts.
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AnkurGMAT20
This is another question: the-table-gives-information-about-teacher-absenteeism-in-21-school-430451.html,

Where KarishmaB has explained that there is no positive correlation between the two columns as there is inconsistency(sometimes increases and sometimes decreases). If we apply the same logic here, our answer for second question is incorrect.

My take would be that if you see more increases than decreases, then select +ve correlation. In majority of the questions, this holds true. There could be one off question where this logic won't work, but I will use the one which works for majority of questions

chetan2u KarishmaB would like to hear your thoughts.
­
I am not sure why you think that answer for the second question is wrong here. There is a clear positive correlation here. If I put it on a line graph, this is what it looks like.

­


When one is rising, the other is rising too. There is only one outlier - the 4th point. It is a positive correlation.
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KarishmaB thank you for the explanation here. For the option "Yesterday's closing price and the price one year ago" I sorted on Yesterdays closing price instead of price one year ago and got a wavy increasing decreasing feeling and hence went with no. Can it be a rule of thumb to go for sorting with both columns in such questions since sorting on price one year ago does give us a good look at the correlation!
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Hi

If someone can help me with a silly but basic question I have, what is the difference between a positive correlation and a strong positive relation?

Regards

GAGAN
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Hi

If someone can help me with a silly but basic question I have, what is the difference between a positive correlation and a strong positive relation?

Regards

GAGAN

Two data sets are positively correlated if they both tend to be higher in the same cases. They are negatively correlated if one tends to be higher in cases where the other is lower. For positively correlated data, their lines tend to slope up or down together; the more consistently this happens, the stronger the positive correlation. Conversely, when two data sets are negatively correlated, the line for one tends to slope up while the other slopes down, and vice versa. The more consistently these opposite slopes occur, the stronger the negative correlation.
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KarishmaB Thanks for this explanation. So, from what I understand, if we come across a sub question asking for correlation between columns A and B, and suppose, it is showing no positive correlation if sorted wrt increasing order in value of column A, we have to also check in terms of increasing order in value of column B as there could be a positive correlation there. Is it?

If the two variables have a natural order, for eg, price one year ago predates yesterday's price and is likely to be the guiding variable - but what if this doesn't show a positive correlation but the opposite way (when sorted wrt yesterday's price) shows a positive correlation, that means we have to check correlation wrt increasing order of both columns, right?
KarishmaB
abhichatur
KarishmaB thank you for the explanation here. For the option "Yesterday's closing price and the price one year ago" I sorted on Yesterdays closing price instead of price one year ago and got a wavy increasing decreasing feeling and hence went with no. Can it be a rule of thumb to go for sorting with both columns in such questions since sorting on price one year ago does give us a good look at the correlation!

That's a good question. Usually, there is a natural sequence say of time e.g. Is revenue earned by a company year or year correlated with the number of employees year on year? As number of employees increase, does revenue increase? All we have to do is look at the data in order of the years.

But for a group of companies there is no natural progression. Note that price one year ago predates yesterday's price and is likely to be the guiding variable. One year ago if a company had higher stock price than company B, is it more likely to have a higher stock price today too? So we arrange "one year ago pricing" in increasing order.
But yes, if there is no natural order, check by sorting both variables.
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Yeah, both variables means both sets of data (both columns).
Rahuljaggu
KarishmaB Thanks for this explanation. So, from what I understand, if we come across a sub question asking for correlation between columns A and B, and suppose, it is showing no positive correlation if sorted wrt increasing order in value of column A, we have to also check in terms of increasing order in value of column B as there could be a positive correlation there. Is it?

If the two variables have a natural order, for eg, price one year ago predates yesterday's price and is likely to be the guiding variable - but what if this doesn't show a positive correlation but the opposite way (when sorted wrt yesterday's price) shows a positive correlation, that means we have to check correlation wrt increasing order of both columns, right?
KarishmaB
abhichatur
KarishmaB thank you for the explanation here. For the option "Yesterday's closing price and the price one year ago" I sorted on Yesterdays closing price instead of price one year ago and got a wavy increasing decreasing feeling and hence went with no. Can it be a rule of thumb to go for sorting with both columns in such questions since sorting on price one year ago does give us a good look at the correlation!

That's a good question. Usually, there is a natural sequence say of time e.g. Is revenue earned by a company year or year correlated with the number of employees year on year? As number of employees increase, does revenue increase? All we have to do is look at the data in order of the years.

But for a group of companies there is no natural progression. Note that price one year ago predates yesterday's price and is likely to be the guiding variable. One year ago if a company had higher stock price than company B, is it more likely to have a higher stock price today too? So we arrange "one year ago pricing" in increasing order.
But yes, if there is no natural order, check by sorting both variables.
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for 2nd question, if you sort by Yesterday's closing price, you`d notice that price one year ago column shows two dips : Company E & D then still how is it positive correlation ??
I hope there`s no rule that - we must sort by lets say x when asked about correlation between x & y or something similar !?


KarishmaB

­
The one-year low and yesterday's closing price

Sort by one year low. As one year low is increasing, the closing price is also increasing. Hence there is a positive correlation between them.

Select YES


Yesterday's closing price and the price one year ago

Sort by price one year ago. As price one year ago is increasing, yesterday's closing price is also increasing except for company C (the 4th point once we sort it in increasing order). Thereafter, yesterday's closing price increases again.
Hence there is a positive correlation between them.

Select YES


The price one year ago and the one-year high


Sort by price one year ago. As price one year ago is increasing, one-year high is also increasing except for company C (the 4th point once we sort it in increasing order). Thereafter, one-year high increases again.
Hence there is a positive correlation between them.

Select YES
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anushree01
for 2nd question, if you sort by Yesterday's closing price, you`d notice that price one year ago column shows two dips : Company E & D then still how is it positive correlation ??
I hope there`s no rule that - we must sort by lets say x when asked about correlation between x & y or something similar !?




Correlation doesn’t require a perfectly smooth increase. What matters is the overall tendency across the data points. Even with a couple of dips, the general pattern is that when yesterday’s prices are higher, the prices one year ago also tend to be higher. That overall tendency is what makes the correlation positive. Sorting is just a way to visualize the pattern more clearly, but the correlation itself is symmetric, it’s the same whether you think of “yesterday vs one year ago” or “one year ago vs yesterday.”

Just to illustrate (and I cannot stress this enough, you do not need to know the formula, how it is calculated, or anything related to this formula at all), the correlation between yesterday’s closing price and the price one year ago is about 0.9, where correlation is measured on a scale from –1 to +1. This is a very strong positive value, and it is exactly the same whether you treat yesterday’s price as the first variable or the one-year-ago price as the first variable.
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Noted, Thank You so much !
Bunuel


Correlation doesn’t require a perfectly smooth increase. What matters is the overall tendency across the data points. Even with a couple of dips, the general pattern is that when yesterday’s prices are higher, the prices one year ago also tend to be higher. That overall tendency is what makes the correlation positive. Sorting is just a way to visualize the pattern more clearly, but the correlation itself is symmetric, it’s the same whether you think of “yesterday vs one year ago” or “one year ago vs yesterday.”

Just to illustrate (and I cannot stress this enough, you do not need to know the formula, how it is calculated, or anything related to this formula at all), the correlation between yesterday’s closing price and the price one year ago is about 0.9, where correlation is measured on a scale from –1 to +1. This is a very strong positive value, and it is exactly the same whether you treat yesterday’s price as the first variable or the one-year-ago price as the first variable.
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Hi Karishma, how does one visualise this during the exam to answer such questions?
KarishmaB

­
I am not sure why you think that answer for the second question is wrong here. There is a clear positive correlation here. If I put it on a line graph, this is what it looks like.

­


When one is rising, the other is rising too. There is only one outlier - the 4th point. It is a positive correlation.
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KarishmaB

Hey, for the 3rd question, the discrepancy of 4th point with regards to Company C (as also explained by you) should make the answer No right. Why are we ignoring that?
KarishmaB

­
The one-year low and yesterday's closing price

Sort by one year low. As one year low is increasing, the closing price is also increasing. Hence there is a positive correlation between them.

Select YES


Yesterday's closing price and the price one year ago

Sort by price one year ago. As price one year ago is increasing, yesterday's closing price is also increasing except for company C (the 4th point once we sort it in increasing order). Thereafter, yesterday's closing price increases again.
Hence there is a positive correlation between them.

Select YES


The price one year ago and the one-year high


Sort by price one year ago. As price one year ago is increasing, one-year high is also increasing except for company C (the 4th point once we sort it in increasing order). Thereafter, one-year high increases again.
Hence there is a positive correlation between them.

Select YES
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Correlation looks at the general trend. As long as that is same for both, it is fine. There can be a few outliers.

Ayralearns
KarishmaB

Hey, for the 3rd question, the discrepancy of 4th point with regards to Company C (as also explained by you) should make the answer No right. Why are we ignoring that?

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