Probability Methods for Cost Uncertainty Analysis, 2nd Edition

336 Probability Methods for Cost Uncertainty Analysis

the preceding section. The right half of Figure 9.8 shows the empirical corre-

lations between Y and its pairings with X

1

, X

2

,and ε. They were computed

by the Excel Correl function. Observe how the empirical correlations compare

favorably with their analytically derived values, as summarized by matrix A

in Section 9.3.2. Differences between them are due to random errors endemic

in all simulations. From a practical view, such differences are negligible.

9.4 Summary

The importance of correlation as a critical consideration in cost uncertainty

analysis cannot be understated. Seen herein,