What happens to the correlation coefficient when you have outliers in your data?
- It decreases
- It increases
- It may become misleading
- It remains the same
Outliers can greatly affect the correlation coefficient, making it misleading. If outliers are in the same direction, they can inflate the correlation. If they are in opposite directions, they can deflate or even reverse the sign of the correlation. Hence, it's important to handle outliers before conducting correlation analysis.
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