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So there are two variables a -- Who is greater than 40 year old (BINARY 0 or 1) b -- If they have a Luxury Car (Binary 0 or 1)

Now they have the data sum values.

  • Total sample size -- 500
  • Total number of people above 40 are -- 60
  • Total number of people have luxury car -- 40
  • Total number of people have luxury car and above 40 -- 10

NOTE: Draw a venn diagram if that helps

Compute the coefficient of the correlation between a and b?

VPapz
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1 Answers1

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A correlation function can handle binary values. Even categorical or enumerated items, under the hood, the computer is giving random numerical assignments and testing for correlation of interaction. For your case you are simply wanting to know how often the two are the same versus how often they are opposite. If they are always opposite each other you would see a negative 1. Always the same positive 1. Zero would mean no correlation.

rayphaistos1
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