Covariance Proof for X,Y: aX + b, Y+d & aX+bY, cX+dY

In summary, the covariance between two random variables X and Y is defined as Cov(X,Y) = E[XY] - E(X)E(Y). Using this definition, we can show that Cov(aX + b, (Y + d)) = ac Cov(X,Y) and Cov(aX + bY, cX + dY) = ac \sigma_x ^2 + bd \sigma_y ^2 +(ad + bc) Cov(X,Y) by expanding using properties of expectations.
  • #1
TomJerry
50
0
If X and Y are two random variable , then the covariance between them is defined as Cov(X,Y) = E[XY] - E(X)E(Y)


i) Show that [itex]Cov (aX + b , (Y + d)) = ac Cov(X,Y)[/itex]

ii) [itex]Cov(aX + bY, cX + dY) = ac \sigma_x ^2 + bd \sigma_y ^2 +(ad + bc) Cov(X,Y)[/itex]
 
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  • #2
Use properties of expectations to expand the portions. For example, for your ``i'':

[tex]
\begin{align*}
cov(aX+b, cY+d) & = E[(aX+b)(cY+d)] - E[(aX+b)]E[(cY+d)] \\
& = E[acXY + adX + bcY + bd] - (a\mu_X+b)(b\mu_Y+d)
\end{align*}
[/tex]

Continue on from there - you know what the answer should look like when you have combined all terms and simplified. A similar approach works for ``ii''.
 

1. What is covariance?

Covariance is a measure of the relationship between two variables. It measures how much two variables change together. A positive covariance indicates that the variables tend to move in the same direction, while a negative covariance indicates they tend to move in opposite directions.

2. How is covariance calculated?

The covariance between two variables, X and Y, can be calculated using the formula: Cov(X,Y) = E[(X-μx)(Y-μy)], where E is the expected value, μx is the mean of X, and μy is the mean of Y. This formula takes into account the individual values of X and Y, as well as their means, to determine the covariance between them.

3. What does a positive covariance mean?

A positive covariance means that the variables have a positive relationship, or that they tend to move in the same direction. This means that when one variable increases, the other variable also tends to increase. However, it does not necessarily mean that there is a causal relationship between the two variables.

4. What is the purpose of proving covariance for aX + b, Y+d & aX+bY, cX+dY?

The purpose of proving covariance for these equations is to show that they have the same covariance, regardless of the values of a, b, c, and d. This is important because it allows us to use different forms of the same equation and still make accurate predictions based on the relationship between the variables.

5. Can covariance be used to determine causation?

No, covariance cannot determine causation. It only measures the relationship between two variables, but it does not indicate which variable is causing the change in the other. To determine causation, further research and analysis is needed.

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