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Correlation Measurements with Microsoft Excel by Stephen Nelson

(Contd. from page 1...)

=CORREL(data set 1,data set 2)

For example, if you have a set of preliminary test scores for a sample of employees in column A and a set of performance feedback scores in column B, as shown in Figure 4-6, and you want to find out whether they're related and if so, how strongly, you can use Excel to find the correlation coefficient for the samples.

The function returns the value 0.87, indicating that the sets are positively related (as the value of one goes up, the value of the other also increases), but the relationship isn't perfect.

PEARSON

The Pearson product moment correlation coefficient function, PEARSON, uses a different equation for calculating the correlation coefficient. This formula doesn't require the computation of each deviation from the mean. Still, the correlation coefficient ranges from +1, indicating a perfect positive linear relationship, to -1, indicating a perfectly negative linear relationship. The PEARSON function uses the following syntax:

=PEARSON(data set 1,data set 2)

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About Stephen Nelson
Seattle CPA Stephen L. Nelson wrote the bestselling book, MBA's Guide to Microsoft Excel, from which this short article is adapted. Nelson also writes and edits downloadable do-it-yourself incorporation kits that businesses and investors can use for setting up an Nebraska incorporation or an Nevada incorporation.
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