COVARIANCE:
- A statistical measure that quantifies how two random variables change together.
- Indicates whether an increase in one variable corresponds to an increase or decrease in another.
- The formula for the sample covariance between two variables, X and Y, with n data points is:
CORRELATION
- A standardized measure that quantifies the strength and direction of the linear relationship between two variables.
- Ranges from -1 (perfect negative correlation) to 1 (perfect positive correlation), with 0 indicating no linear correlation.
- Formula for the sample correlation coefficient (Pearson correlation coefficient) between X and Y, with n data points, is:
DIFFERENCES
- Covariance measures the degree to which two variables change together, but it doesn’t provide a standardized measure. Correlation measures the strength…
