# How do I calculate Karl Pearsons coefficient of correlation through step deviation method?

## Correlation coefficient calculator with steps

Correlation is independent of scale and origin.

So, no matter which number you are subtracting from and subsequently dividing your original series, it wont affect your final correlation number!,So, lets say you have two series X and Y and let A,B, C and D be 4 constants.

Build new series as (X-A)/B and (Y-C)/D.

The correlation for the new seriesu2019 will be same as X and Y.

Hope it helps!

## How to calculate Pearson correlation coefficient calculator

Step 1: Make a chart.

Use the data, and add three more columns: xy, x^2, and y^2,Step 2: Multiply x and y together to fill the xy column.

,Step 3: Take the square of the numbers in the x column, and put the result in the x2 column.

,Step 4: Take the square of the numbers in the y column, and put the result in the y2 column.

,Step 5: Add up all of the numbers in the columns and put the result at thenbottom.

2 column.

The Greek letter sigma (u03a3) is a short way of saying u201csum of.

u201d,Step 6: Use the correlation coefficient formula

## Test for correlation coefficient calculator

There is no test for meaningfulness.

You have to use your judgement and your knowledge of the field you are working in.

,There are tests for significance, but that is not the same thing at all.

## Calculate correlation coefficient in Excel

For linear correlations you can install the data analysis toolpak by going to options -> add-ins -> hit u2018gou2019 at the bottom -> check the analysis toolpak and hit ok -> now navigate to your data tab and select data analysis on the top right -> lastly select correlation and specify your data.

,That will leverage built-in excel functionality to calculate your coefficients which I assume is what youu2019re looking for since you specified Excel.

Otherwise the formula is pretty easy to reproduce with basic excel in-line functions and can be found with a quick google search.

## r-value calculator online

*** THIS ANSWER AND SITUATION APPLIES TO PROPERTIES PURCHASED AS AN INVESTMENT ONLY AND NOT SELF-OCCUPATION ***,(p/s.

This answer may be a little cluttered.

I have articulated it better here (or so I believe): Prasanna Bhaleraos answer to Is it worth it to purchase multiple rental properties in order to generate passive income? Or are there better alternatives?).

,This is a very good question and kudos to Pranab Das for asking it.

It is very relevant to people who wish to buy property to rent.

Answering with context to India but if figures are adjusted appropriately as per every country, one can get the results.

,So, one will buy the property - say a 3 Bedroom apartment for u20b975 lakhs + fees.

The person will put in how down payment, take out a loan and pay some one-time fees, taxes, etc.

during registration.

So one must calculate the net outflow as follows:,[A] Net outflow:Downpayment = d.

Say u20b920 lakhs (u20b920,00,000),Loan principal = p.

Say u20b950 lakhs (50,00,000),Loan is given at an interest rate = r.

Say 6.

8%.

,Loan is for a term in months = n.

Say 240 months.

,EMI or equated monthly instalment = e.

For the above it is u20b938,167.

,Total Interest on the principal borrowed for the total period = i.

,How to calculate u2018iu2019 in a simple way? You will know your EMI (e).

You know the total period in months (n).

(e * n) = total payment to bank.

Then i = (e * n) - p.

i = u20b941,60,074,One-time fees, deposits, outgoings, registration charges, stamp duty, and all the extras (if not part of u2018du2019 and u2018pu2019) = o.

Say this is u20b98,00,000.

,Net outflow = d + p + i + (o) = u20b91,19,60,074.

I will round this up to u20b91.

2 Cr.

,[B] Opportunity Cost of [A]If one had not purchased the property, put u2018du2019 and u2018eu2019 in some investment.

If the person invests EMI amount (e) in some scheme - maybe bank RD or MF SIP, then that is also an investment.

All this investment earns an annuity over the period (n/12).

,Now we can assume some rate of return.

Bank deposits, Small Savings schemes return about 5~6% before tax, maybe 4% after tax.

MFs return 12% pre-tax and 10.

5% after tax.

If there is a mix of the two, let us average the return to 9% per annum pre tax.

There are lumpsum and annuity calculators online.

For example:,u20b915+u20b98.

4 lakhs at 9% over 20 years becomes u20b91,31,14,321,SIP of u20b938,200 at 9% over 20 years becomes u20b92,57,04,628,The gross value = u20b93,88,18,949,Assuming that property appreciates 4 times (a high rate of appreciation these days), u20b975 lakhs becomes u20b93 Cr.

This is the sale price.

,The house cost was u20b91.

2 cr (A).

So there is a gain of u20b91.

8 Cr.

,Reduce this from B and the deficit is -u20b9 2,08,18,949.

,[C] Rental on such a propertyA 3-Bedroom apartment of u20b975 lakhs is expected to fetch a maximum rent of u20b920,000 pm at the start and an increase of 5% every year.

,Note that u20b970.

80 lakhs is all pre-tax.

But assume zero tax.

,So we have reduced the deficit to u2014u20b91,37,38,949,This is where it gets presumptuous.

,We are assuming a rent increase of u20b91000 every year.

This may not happen.

,We cannot assume that the property will be rented out all 12 months of the year for 20 years.

Not only this may not happen, but it is also highly unlikely.

[D] Property Maintenance Expenses (thanks to Amrut S)Such a property will have u20b930,000 peer year as AMC at the start of the occupation, 10% as non-occupancy charges or u20b93,000 and u20b9 15,000 per year as property tax.

Assume this to grow at the same u20b91000 per year:,So the deficit rises to -u20b91,47,14,949.

,Note that I am not even considering actual maintenance.

,,As you can see, buy to rent, is not really worth it.

,I have assumed a modest 9% growth on money in opportunity cost.

(In the last 5 years, I have managed a return of more than 25% on MFs alone.

),I have assumed a high rate of appreciation on the property of 400% over 20 years.

In the current scenario it looks unlikely but who knows?,I have assumed that the property will be rented all year round for 20 years.

,I have assumed that property is sold after 20 years.

Will someone sell after 20 years? I highly doubt it (real investors buy and sell within 5 years).

So the u20b93 Cr is just a figure on paper.

,I have assumed zero tax on rental income but to be fair, I have assumed no tax on opportunity income (B) either.

,Of course, one can adjust all this.

But it is my firm and confirmed belief that buying property (as an investment and for rental income) is not a wise decision.

(But, always buy property for self-occupation to get rid of vagaries of renting.

),I will be happy to stand corrected or if I missed something.

## Calculate correlation coefficient in R

Given data is insufficient to compute correlation.

,The values of u03a3X and u03a3Y are also required to compute r.