Cross Validated Asked on November 21, 2021
Pearsons corelation coefficient is defined as follows
$$ r_{x,y} =frac {sum (x_i -bar X)(y_i – bar Y)}{sqrt{sum(x_i-bar X)^2} sqrt{sum(y_i-bar Y)^2}} $$.
Now, maximum magnitude of a correlation coefficient is known to be $1$;
which is possible only if
$$Numarator = denominator$$,
$$or, {sum (x_i -bar X)(y_i – bar Y)}={sqrt{sum(x_i-bar X)^2} sqrt{sum(y_i-bar Y)^2}} … (1) $$;
Now; if the dataset is perfectly corelated, then how or why the relation $… (1)$ works? or in other words, the denominator or numarator becomes equal?
Samely the alternate equation,
$$r_{xy}= frac {nsum X_iY_i- (sum x_i)(sum y_i)} {sqrt{nsum x_i^2 -(sum x_i)^2} sqrt{nsum y_i^2-(sum y_i)^2}}$$
now, the coefficient of correlation will be =1 only if
$$numerator=denominator$$
$$or,{nsum X_iY_i- (sum x_i)(sum y_i)} = {sqrt{nsum x_i^2 -(sum x_i)^2} sqrt{nsum y_i^2-(sum y_i)^2}} … (2) $$
If the dataset is perfectly correlated ; then how to tell relation $… (2)$ will work?
So in brief my question is ….
I am looking for necessarily intuitive explanation of what these mathematical terms mean; such as it is quite clear that ${sum (x_i -bar X)(y_i – bar Y)}$ is a sum of areas made by the data points which comes from covariance. But why this exact same area will be cancelled out by the denominator, that I could not understand by any way.
What I tried already:
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