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Correlation Assignment 1

There is a strong positive correlation (r = 0.855) between the number of cars sold and the number of salespeople on duty each week based on 15 weeks of data from a car dealership. Approximately 73% of the variation in cars sold can be explained by the number of salespeople. A significance test shows this correlation is statistically significant (p < 0.05) and not likely due to chance. Therefore, having more salespeople on duty is significantly related to more cars being sold.

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163 views3 pages

Correlation Assignment 1

There is a strong positive correlation (r = 0.855) between the number of cars sold and the number of salespeople on duty each week based on 15 weeks of data from a car dealership. Approximately 73% of the variation in cars sold can be explained by the number of salespeople. A significance test shows this correlation is statistically significant (p < 0.05) and not likely due to chance. Therefore, having more salespeople on duty is significantly related to more cars being sold.

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Sim Pack
Copyright
© © All Rights Reserved
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Problem:

A manager of a car dealership believes there is a relationship between the number of salespeople on
duty and the number of cars sold. Given the following data for the past 15 weeks:

Week Number of cars sold Number of salespeople

1 79 6
2 64 6
3 49 4
4 23 2
5 52 3
6 60 5
7 45 4
8 25 2
9 36 3
10 70 7
11 63 5
12 45 3
13 50 5
14 38 4
15 50 6

a) Solve for the Pearson product-moment correlation coefficient manually. Interpret it.
b) Test for the significance of the Pearson r.
Solution:

# of cars # of
week Sold Salespeople
Pearson r :

Σ [ ( x − xmean ) ( y − ymean ) ]
r= 2 2
√ Σ ( x − xmean ) Σ ( y − ymean )

[ 290.33335 ]
r=
√ ( 3454.9335 ) ( 33.333335 )
r =0.855534831

r 2=0.731939847

Since r is positive and above 0.50, there is a strong positive relationship between the the number of
salespeople on duty and the number of cars sold. If there are more salespeople on duty, more cars
are sold.

Also, r2 = 0.731939847 or ≈ 73% in the variation of the cars sold can be attributed to the number of
salesperson on duty.
Testing for the significance of the Pearson r:

using significance level of α = 0.05


degrees of freedom (N-2) = (15 – 2) = 13

from the Pearson-correlation table, the critical value is r = 0.513977

Hypothesis : H0 : ρxy = 0;
H1 : ρxy ≠ 0.

Since the correlation r = 0.855534831 falls in the tail of the critical region (beyond +0.513977), we can
conclude that the test is statistically significant. We can therefore reject the null hypothesis and
conclude that the correlation is significantly different from zero.

Therefore, there is significant positive relationship between the number of cars sold to the number of
salespeople on duty, since r(15) = 0.855534831, and p < 0.05.

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