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Correlation Matrix in Excel

Before moving towards the actual topic of the Correlation Matrix in Excel, I would like to explain what correlation is and where it can be used.

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As per English literature, the word Correlation means a mutual relationship or connection between two or more things. In statistical terms, we come up with situations where we are keen to check (or find out) if there is any relation/association between two (or more than two) variables. These are the things of interest while doing statistical analysis. In a nutshell, it can be said that correlation is a statistical analytical process that allows us to find out the relationship between two or more variables.

Correlation can be measured through the correlation coefficient (denoted by “r”), a numeric measure to determine the association/mutual relation between two variables at a time. The correlation is considered perfect if the correlation coefficient’s numeric value is -1 or +1. However, it is almost impossible to find out the perfect correlation; if the value of the correlation coefficient is zero (0), then it is said that there is no correlation between the two variables under study. If the correlation value varies from -1 to +1, the correlation is weak, moderate, and strong based on the numeric value of the correlation coefficient.

Correlation Matrix: The correlation matrix is a table that represents the values of correlation coefficients for different variables. It shows a numeric value of the correlation coefficient for all the possible combinations of the variables. It is used when determining the relationship between more than two variables. It consists of rows and columns containing variables, and each cell contains coefficient values that give information about the degree of association/linear relationship between two variables. Moreover, it can also be utilized in some statistical analysis. Ex. Multiple Linear Regression, where we have several independent variables and a correlation matrix, helps determine their degree of association.

How to Enable Analysis ToolPak in Excel?

Go to Options.

Whoa, you have successfully enabled Analysis ToolPak in Excel.

Now you should be able to construct a correlation matrix for the given data set.

How to Create a Correlation Matrix in Excel?

Creating a correlation matrix in Excel is very simple and easy. Let’s use an example to understand the steps to create a correlation matrix in Excel.

You can download this Correlation Matrix Excel Template here – Correlation Matrix Excel Template

Example of Correlation Matrix in Excel

Suppose we have a data set containing annual marks in Physics, Mathematics, and Statistics. And we are keen on figuring out if there is any association/relationship between these three.

Let’s find it out through an Excel correlation matrix. Follow these steps.

A correlation window will appear.

Step 3 – In the Correlation window that popped up, select the Input Range as your source data, including column headers (A1:C10 in this case).

Under Output options, you have three customizations available.

If you want to store the result in an entirely new workbook, select the New Workbook radio button. It will allow you to store the result under the new untitled workbook.

I referenced the sheet where my source data is (A12) in this example.

So the output will be as given below.

Let’s figure out our conclusions through the correlation matrix in Excel:

The cells having value 1 are the cells associated with variables that correlate with themselves.

Things to Remember About Correlation Matrix in Excel

Constructing a correlation matrix in Excel makes sense when you have three or more three variables to check the association.

Analysis ToolPak add-in is available in all versions of Excel but not automatically enabled. You need to enable it through the steps mentioned in the article above. That’s how you can construct a correlation matrix in Excel. I hope it helps you grow.

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