correlation in monte-carlo probabilistic calculations

[mjob]

Hi Chandoo,


I'm a new user here and was releived to find your Comprehensive Guide to Monte-Carlo Simulations.

Could you provide, or advise where to look, to create a correlation within the monte-carlo sequence such that a relationship can be established between 2 or more variable distributions?

In my example I need to apply a positive relationship of ~0.7 between 2 of 5 variables utilised in a calculation.


thanks and regards,

mjob

 

[SirJB7]

Hi, mjob!


First of all welcome to Chandoo's website Excel forums. Thank you for your joining us and glad to have you here.


As a starting point I'd recommend you to read the green sticky topics at this forums main page. There you'll find general guidelines about how this site and community operates (introducing yourself, posting files, netiquette rules, and so on).


Among them you're prompted to perform searches within this site before posting, because maybe your question had been answered yet.


Feel free to play with different keywords so as to be led thru a wide variety of articles and posts, and if you don't find anything that solves your problem or guides you towards a solution, you'll always be welcome back here. Tell us what you've done, consider uploading a sample file as recommended, and somebody surely will read your post and help you.


And about questions in general...


If you haven't performed yet the search herein, try going to the topmost right zone of this page (Custom Search), type the keywords used in Tags field when creating the topic or other proper words and press Search button. You'd retrieve many links from this website, like the following one(s) -if any posted below-, maybe you find useful information and even the solution. If not please advise so as people who read it could get back to you as soon as possible.


And about this question in particular...


I assume you're referring to these links:

http://chandoo.org/wp/2010/05/06/data-tables-monte-carlo-simulations-in-excel-a-comprehensive-guide/

http://chandoo.org/wp/2011/05/19/data-tables-and-monte-carlo-simultions-update/

whose author, Hui, is the dean of the Excel Ninjas and surely will be coming back to you.


Regards!

 

[Hui]

MJob


Firstly, Welcome to the Chandoo.org Forums


Typically to do what you want you would setup a Data table and vary the 4 or 5 input variable according to known or estimated distributions and collect suitable output measures at the same time.

Run the Monte Carlo analysis Data Table through 10, 20 or 50,000 iterations

Then use Multiple Variable Linear Regressions to analyse the correlation between the results.


This is briefly discussed in the Multiple Variable Linear Regressions section of: http://chandoo.org/wp/2011/01/26/trendlines-and-forecasting-in-excel-part-2/ (about half way through the post)


Note that the Linest is an Array Function and hence may cause the DT to recalculate. I would copy/paste the DT values as values after running the DT before analysing the results using the Multiple Variable Linear Regression