Quantitative Methods in Project Management
This book combines theoretical and practical applications and takes project managers through the most important quantitative methods, integrates them, and illustrates interrelationships.
TABLE OF CONTENTS Quantitative Methods in Project Management
Covariance and Correlation in Projects
It often arises in the course of executing projects that one or more random variables, or events, appear to bear on the same project problem. For instance, fixed costs that accumulate period by period and the overall project schedule duration are two random variables with obvious dependencies. Two statistical terms come into play when two or more variables are in the same project space: covariance and correlation.
Coveriance
Covariance is a measure of how much one random variable depends on another. Typically, we think in terms of "if X gets larger, does Y also get larger or does Y get smaller?" The covariance will be negative for the latter and positive for the former. The value of the covariance is not particularly meaningful since it will be large or small depending on whether X and Y are large or small. Covariance is defined simply as:
Cov( X, Y) = E( X * Y) - E( X) * E( Y)
If X and Y are independent, then E( X * Y) = E( X) * E( Y), and COV( X, Y) = 0.
Table 2-7 provides a project situation of covariance involving the interaction of cost and schedule duration on a WBS work package. The example requires an estimate of cost given various schedule possibilities. Once these estimates are made, then an analysis can be done of...
Copyright J. Ross Publishing, Inc. 2004 under license agreement with Books24x7
