Six Sigma and Statistics

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What is Covariance in statistics: How to use it in excel and how it is different from correlation

What is Covariance in statistics

Covariance is a mathematical or statistical tool which measures the relationship between two random variables. Covariance evaluates how much – to what extent – the variables change together.

The covariance can take any positive or negative value and it interprets as

  • Positive covariance: Indicates that two variables tend to move in the same direction.
  • Negative covariance: Indicates that two variables tend to move in inverse directions.

The widespread use of Covariance is in finance for portfolio modelling to diversify the assets. We are choosing assets which don’t show a high positive covariance with each other and the unsystematic risk can be partially eliminated.

Mathematical calculation of covariance will be as given be:

What is Covariance in statistics
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Correlation and Regression: When to use these 2 in analysis

Correlation and Regression

What is a correlation:

Correlation is a test in statistics to get to know if there is any relationship exist between two datasets or not. Correlation is of two types positive and negative. A positive correlation means if one variable is increasing then 2nd variable is also increasing while a negative correlation shows if one variable increases then 2nd variable decreases.

Correlation between two data sets will be measured by the coefficient of correlation. The value of the coefficient of correlation lies between -1 and 1.If the value is zero it means there is no correlation between data sets. If the value is greater than 0 it means positive correlation and +1 will show a perfect … Continue Reading

What are measures of dispersion: How to calculate range, variance, Quartile and standard deviation

What are measures of dispersion

Dispersion or Spread is the extent to which the observations vary about their mean in a dataset. The quantity that measures a dispersion in a data set is known as measure of dispersion. It is used to check variability/spread of data i.e. to know how much homogenous or heterogeneous the data is. The measure of dispersion are of two types that is absolute and relative dispersion.

What are measures of dispersion
Type of measures of dispersion

An absolute measure of dispersion is one that measures dispersion in terms of the same units as the unit of data. if the unit of data is meter, kilogram or mile then measure of dispersion will be in the same unit.

A relative measure of Continue Reading

What are measures of central tendency: How to calculate it in Excel?

What are measures of central tendency?

measure of central tendency is a single value that attempts to describe a set of data by identifying the central position within that set of data. These measures indicate where most values in a distribution fall and are also referred to as the central location of a distribution.

The three most commonly used measures of central tendency are mean, median, and mode. Each of these methods calculates the location of the central point by using a different method. Choosing the best measure of central tendency depends on the data we have.

Let us understand how to measure/calculate these central tendencies and how to determine which one is best for our data.

Mean/Average: Mean … Continue Reading

What is Data: 2 types of data and their general understanding

What is Data

Data are basically units of information that are usually numeric. Technically it is a set of values of qualitative or quantitative variables of a person(s)/subject(s) usually collected by observation.

Data is raw, unorganized which needs to be processed, organized, structured and to be presented in a given context to make it useful to be called as information.

Data could be primary or secondary depending on source of origination.

What is data
What is data

In a high level categorization we can bifurcate data as Qualitative and Quantitative

What is Qualitative data type

Qualitative data type are mostly in categorical form is non numerical and is available in textual and non descriptive form like rating “very satisfied”, “Yes/No”, “Male/Female”, “Observation/review of … Continue Reading