Scatter Diagram Method
Scatter Diagram
Definition: A scatter diagram, also known as a scatter plot, is a graphical representation used to examine the relationship between two variables. Each pair of data points is plotted as a dot on the graph, forming a pattern that helps visualize correlations.
Degree of Correlation:
- Perfect Positive Correlation (r=+1): All points lie precisely on a straight line rising from the bottom-left to the top-right of the graph.
- Perfect Negative Correlation (r=-1): All points lie precisely on a straight line falling from the top-left to the bottom-right of the graph.
- High Degree of Positive Correlation (r=+ High): Points cluster closely around a rising trend line, indicating a strong positive relationship.
- High Degree of Negative Correlation (r=- High): Points cluster closely around a falling trend line, indicating a strong negative relationship.
- Low Degree of Positive Correlation (r=+ Low): Points are scattered but generally trend upwards from the bottom-left to the top-right.
- Low Degree of Negative Correlation (r=- Low): Points are scattered but generally trend downwards from the top-left to the bottom-right.
- No Correlation (r=0): Points are scattered randomly across the graph, showing no discernible pattern or relationship between the variables.
Applications:
- Statistical Analysis: Used in statistics to visually inspect relationships between variables before formal analysis.
- Scientific Research: Helps researchers identify trends or patterns in data sets.
- Business and Finance: Used to analyze correlations between market variables, economic indicators, and investment returns.
Conclusion:
Scatter diagrams provide a quick and intuitive way to assess the relationship between two variables visually. They are essential tools in data analysis for understanding correlations and making informed decisions in various fields, from scientific research to business strategy and finance.