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# RANK CORRELATION COEFFICIENT

## What is a frequency distribution?

❶The numeric value of the correlation coefficient reveals the strength of the correlation coefficient between both stock prices.

Spearman Rank Correlation method without Tied Ranks. Spearman Rank Correlation with Tied Ranks. To understand Rank Correlation, the two terms - Rank and Correlation should be understood separately.

Now as the word suggests, Rank means hierarchical positioning when say n individuals are arranged in order or merit of proficiency in possession of two characteristics say A and B or here, hierarchical positioning of given data set.

The ranks in two characteristics in general will be different. For example, if consider the relationship between intelligence and beauty, it is not necessary that a beautiful person is equally intelligent also.

Whereas, the Correlation is one of the most common and most useful statistics. A Correlation is a single number indicating the degree or extent of relationship among two variables taken. It is a bivariate study measuring the strengths of relationship association between two variables. In studies, a Rank Correlation is one of the statistics that measures an ordinal association and can be used to assess the significance of the relation between variables.

To different values of a particular variable, a Rank Correlation Coefficient is used to measure the degree of similarity between two rankings, and their Correlation coefficients. An increasing Rank Correlation coefficient indicates increasing association between rankings of variables. This is a non-parametric test that measures the degree of association between two variables. It was developed by Spearman, hence called the Spearman Rank Correlation. The data in which the items being measured are ordered are indication whether they possess less, more, or the same amount of the characteristics being measured.

For example, grading the participants in a painting contest, the dancer ranked one is a better dancer than the dancer being ranked two. The dancer ranked two is a better dancer than the dancer who is ranked three, and so on. Note that, this scale helps to determine less than, greater than, or equal to the degree the same attributes, it still does not play any role in defining the magnitude in number of the relationship between units.

Increasing trend between X and Y. Decreasing trend between X and Y. The sign of the Spearman correlation represents the direction and degree of association between X generally taken as the independent variable and Y the dependent variable.

If Y tends to increase when X shows an increase, the Spearman correlation coefficient is positive. If Y tends to deviate when X increases, the Spearman correlation coefficient is negative. If a Spearman correlation comes out to be zero, then there is no tendency in Y to either increase or decrease when X increases X and Y have no association between them.

The Spearman correlation increases in magnitude as X and Y become closer X and Y start to have a high and higher degree of association. When X and Y are perfectly monotonically increasingly related, the Spearman correlation coefficient is 1. A perfect monotone increasing relationship means that for any two pairs of data values X i , Y i and X j , Y j , that the difference between X i and X j and Y i and Y j always follow the same sign whereas, perfect monotone decreasing relationship indicates that the differences will always have opposite signs.

In case of continuous distributions, the grade of an observation is taken, by convention, one half less than the rank, and hence the grade and Rank Correlations are considered the same in this case.

Thus this corresponds to one possible treatment of tied ranks. Spearman Rank-order Correlation assumes monotonic relationship since a monotonic relationship is less restrictive than a linear relationship.

The ranking process is not that difficult a task. Consider the following example with data having the marks achieved in a mathematics and science examination:.

By allotting ranks to the individuals. Here you can avail the optimum writing help under the guidance of renowned researchers and subject experts Home services offers blog Assignment Library.

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It is called as positive correlation. The two stock prices are negatively correlated when the cost of one stock falls and the cost of the other goes up. The correlation coefficient measures the power of the. Their correlation coefficient is going to have the value of 1, if two stock prices have perfect positive correlation. In case, the two stock prices do not change in a consistent manner, then the value of the coefficient correlation of these two stocks is 0. The indication of the correlation coefficient reveals whether the two stock prices are negatively or positively correlated.

Correlated stock prices move in opposite ways, and they have a correlation coefficient less than zero, but not The numeric value of the correlation coefficient reveals the strength of the correlation coefficient between both stock prices. The more powerful the positive correlation, the closer the value of the correlation coefficient will be equal to 1. The more powerful the negative correlation, the closer the correlation coefficient will likely be to

## Main Topics

Rank Correlation Coefficient A nonpararnetric measure of association between two variables X and Y is given by the rank correlation coefficient 6 L:n r~ = 1 – (2n) di2, -1,=1 where. d, is the difference between the ranks assigned to XI and Yi, and n .

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Correlation between the ranks xi’s and yi’s is called the Pearsonian coefficient (or Rank Correlation) of between A and B for that group of individuals. This is a non-parametric test that measures the degree of association between two variables.