Excel Correlation Matrix

Excel Correlation Matrix (Table of Contents)

• Correlation Matrix in Excel
• How to Enable Analysis ToolPak in Excel?
• How to Create Correlation Matrix in Excel?

Correlation Matrix in Excel

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

• 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 in finding out), if there is any relation/association between two (or more than two) variables. These are the things of interest while doing a statistical analysis. In a nutshell, it can be said that the correlation is a statistical analytical process, which allows us in finding out the relationship between two or more variables.
• Correlation can be measured through correlation coefficient (denoted by “r”) which is a numeric measure to find out the association/mutual relation between two variables at a time. The correlation is said to be perfect if the numeric value of the correlation coefficient 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 value of correlation varies from -1 to +1, correlation is said to be weak, moderate and strong based on the numeric value of correlation coefficient.
• Correlation Matrix: Correlation matrix is a table which 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 basically is used when we must find out the relationship between more than two variables. It consists of rows and columns containing variables and each cell contains coefficient values which give information about the degree of association/linear relationship between two variables. Moreover, it can also be utilized in some of the statistical analysis. Ex. Multiple Linear Regression, where we have several independent variables and correlation matrix helps in finding out the degree of association between them.

All these basic things are enough. Let’s go out for some practices of correlation matrix in excel and see how we can construct a correlation matrix in excel.

How to Enable Analysis ToolPak in Excel?

Excel has a powerful tool for doing all the statistical analysis using which we can do almost every sort of important analysis through just a few clicks. It is named as Analysis ToolPak. If you are not able to see it through your data analysis tab, you probably needed to add it there. Just follow the below simple steps.

• In excel workbook, click File.

• Go to Options.

• Under Options, go to Add-ins,

• A screen will pop up, there go to Manage option and select Excel Add-ins and then click on Go Button.

• Under Add-ins pop up, check Analysis ToolPak and click OK.

• Whoa, you have successfully enabled Analysis ToolPak in excel.

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

How to Create Correlation Matrix in Excel?

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

Example of Correlation Matrix in Excel

Suppose we have a data set containing annual marks in Physics, Mathematics, and Statistics respectively. And we 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.

Step 1 – Go to Data tab in your Excel workbook and click on Data Analysis.

Step 2 – Data Analysis window will appear. Select Correlation there and click OK.

• Correlation window will appear.

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

Step 4 – As your data is grouped by columns, click on Columns radio button.

Step 5 – Under Grouped by, Labels in the first row should be checked, as we have column headers stored under the first row for our reference.

• Under Output options, you have three customizations available.
• If you want to store the result under the same worksheet where your source data is, click on Output Range: radio button and you should be able to give the output reference from the current worksheet.
• If you want to store the result in new worksheet than your data source, click on New Worksheet Ply: radio button. It will store the output in a new excel sheet under the same workbook.
• If you want to store the result in an entirely new workbook, you need to select the New Workbook radio button. It will allow you to store the result under new untitled workbook.

In this example, I have given reference to the same sheet where my source data is (A12).

Step 6 – Click OK once done with customizations.

• 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, which has a correlation with themselves.
• 2267… shows that there is a positive correlation between Marks in Physics and Marks in Mathematics. However, it can be considered a weak positive correlation. It ideally shows, the increase in Marks obtained in Physics leads 22.67% increase in Marks obtained in Mathematics.
• -0.6016… shows that there is a strong negative correlation between Marks in Physics and Marks in Statistics. It ideally shows, the increase in Marks obtained in Physics leads 60.14% decrease in Marks obtained in Mathematics.
• 4506… shows that there is a positive correlation between Marks in Mathematics and Marks in Statistics. It ideally shows, the increase in Marks obtained in Mathematics leads 45.06% increase in Marks obtained in Mathematics.

Things to Remember About Correlation Matrix in Excel

• Constructing a correlation matrix in excel makes sense when you have three or more than 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 this article above. That’s how you can construct a correlation matrix in excel. Hope it helps you grow.

Recommended Articles

This has been a guide to Correlation Matrix in Excel. Here we discuss how to create a correlation matrix in excel along with example and downloadable excel template. You can also go through our other suggested articles –

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