Correlation after opposite-sign linear transforms
Question
Two random variables , have correlation coefficient . New variables are formed as and . Find the correlation coefficient of and .
Short answer
. Correlation ignores additive constants and positive scaling, but a negative scale factor flips its sign. The covariance picks up the product of slopes, , while the product of standard deviations picks up , so the ratio becomes .
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Open the worked solutionLessons behind this question
- Covariance and Correlation
- Sample Spaces, Events, and the Probability Axioms
- Conditional Probability, Total Probability, and Bayes' Rule
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