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Understanding the fundamentals of statistics is a core capability for becoming a Data Scientist. Review
these essential ideas that will be pervasive in your work and raise your expertise in the field.
By Shirley Chen, Data Analyst @ Outdoorsy on April 21, 2022 in Data Science

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Statistics is a form of mathematical analysis that uses quantified models and Applying Descriptive and Inferentia
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representations for a given set of experimental data or real-life studies. The main
advantage of statistics is that information is presented in an easy way. Recently, I reviewed
all the statistics materials and organized the 8 basic statistics concepts for becoming a data
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Prescriptive Analytics provides recommendations regarding actions that will take Decision Tree Algorithm, Explained

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Probability Ignore All (But Two) Tools

Probability is the measure of the likelihood that an event will occur in a Random
Experiment.

Complement: P(A) + P(A’) = 1

Intersection: P(A∩B) = P(A)P(B)

Union: P(A∪B) = P(A) + P(B) − P(A∩B)

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Conditional Probability: P(A|B) is a measure of the probability of one event occurring with
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some relationship to one or Topics
more other events. P(A|B)=P(A∩B)/P(B), when P(B)>0.
Independent Events: Two events areIntelligence
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the probability of occurrence ofComputer
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P(A|B)=P(A), P(B|A)=P(B)
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Mutually Exclusive Events: Two events are mutually exclusive if they cannot both occur at
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the same time. P(A∩B)=0 and P(A∪B)=P(A)+P(B).
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Bayes’ Theorem describes theProgramming
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Central Tendency
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Mean: The average of the dataset.

Median: The middle value of an ordered dataset.

Mode: The most frequent value in the dataset. If the data have multiple values that
occurred the most frequently, we have a multimodal distribution.

Skewness: A measure of symmetry.

Kurtosis: A measure of whether the data are heavy-tailed or light-tailed relative to a normal
distribution

Skewness.

Kurtosis.
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Range: The difference betweenCareer
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Percentiles, Quartiles and Interquartile
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Percentiles — A measure thatMLOpsindicates the value below which a given percentage of
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Quantiles— Values that divide the number of data points into four more or less equal
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Interquartile Range (IQR)— A measure of statistical dispersion and variability based

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quartiles. IQR = Q3 − Q1
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Percentiles, Quartiles and Interquartile Range (IQR).

Variance: The average squared difference of the values from the mean to measure how
spread out a set of data is relative to mean.
Standard Deviation: The standard difference between each data point and the mean and
the square root of variance.

Population and Sample Variance and Standard Deviation.

Standard Error (SE): An estimate of the standard deviation of the sampling distribution.

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Population and Sample Standard Error.
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Causality: Relationship between two events where one event is affected by the other.
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Covariance: A quantitative measure of the joint variability between two or more variables.
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Correlation: Measure the relationship between two variables and ranges from -1 to 1, the
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normalized version of covariance.

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Covariance and Correlation.

Probability Distributions
Probability Distribution Functions
Probability Mass Function (PMF): A function that gives the probability that a discrete
random variable is exactly equal to some value.

Probability Density Function (PDF): A function for continuous data where the value at any
given sample can be interpreted as providing a relative likelihood that the value of the
random variable would equal that sample.
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Comparison between PMF, PDF, and CDF.

Continuous Probability Distribution

Uniform Distribution: Also called a rectangular distribution, is a probability distribution
where all outcomes are equally likely.

Normal/Gaussian Distribution: The curve of the distribution is bell-shaped and

symmetrical and is related to the Central Limit Theorem that the sampling distribution of
the sample means approaches a normal distribution as the sample size gets larger.

Exponential Distribution: A probability distribution of the time between the events in

a Poisson point process.

Chi-Square Distribution: The distribution of the sum of squared standard normal deviates.
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Discrete Probability Distribution
Bernoulli Distribution: The distribution of a random variable which takes a single trial and
only 2 possible outcomes, namely 1(success) with probability p, and 0(failure) with
probability (1-p).

Binomial Distribution: The distribution of the number of successes in a sequence

of n independent experiments, and each with only 2 possible outcomes, namely 1(success)
with probability p, and 0(failure) with probability (1-p).

Poisson Distribution: The distribution that expresses the probability of a given number of
events k occurring in a fixed interval of time if these events occur with a known constant
average rate λ and independently of the time.

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Null and Alternative Hypothesis

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phenomena or no association among groups. Alternative Hypothesis: Be contrary to the
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Interpretation
P-value: The probability of the test statistic being at least as extreme as the one observed
given that the null hypothesis is true. When p-value > α, we fail to reject the null hypothesis,
while p-value ≤ α, we reject the null hypothesis, and we can conclude that we have a
significant result.

Critical Value: A point on the scale of the test statistic beyond which we reject the null
hypothesis and is derived from the level of significance α of the test. It depends upon a test
statistic, which is specific to the type of test, and the significance level, α, which defines the
sensitivity of the test.

Significance Level and Rejection Region: The rejection region is actually dependent on
the significance level. The significance level is denoted by α and is the probability of
rejecting the null hypothesis if it is true.

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A Z-test is any statistical test for which the distribution of the test statistic under the null
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A T-test is the statistical test if the population variance is unknown, and the sample size is
not large (n < 30).

Paired sample means that we collect data twice from the same group, person, item, or
thing. Independent sample implies that the two samples must have come from two
completely different populations.

ANOVA (Analysis of Variance)

ANOVA is the way to find out if experimental results are significant. One-way
ANOVA compares two means from two independent groups using only one independent
variable. Two-way ANOVA is the extension of one-way ANOVA using two independent
variables to calculate the main effect and interaction effect.

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Chi-Square Test checks whether or not a model follows approximately normality when we
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have s discrete set of data points. Goodness of Fit Test determines if a sample matches
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the population fit one categorical variable to a distribution. Chi-Square Test for
Independence compares two sets of data to see if there is a relationship.

Regression

Linear Regression
Assumptions of Linear Regression

Linear Relationship
Multivariate Normality
No or Little Multicollinearity
No or Little Autocorrelation
Homoscedasticity

Linear Regression is a linear approach to modeling the relationship between a dependent

variable and one independent variable. An independent variable is a variable that is
controlled in a scientific experiment to test the effects on the dependent variable.
A dependent variable is a variable being measured in a scientific experiment.

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Multiple Linear Regression isMLOpsa linear approach to modeling the relationship between a
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dependent variable and two or more independent variables.
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Multiple Linear Regression Formula.

Steps for Running the Linear Regression

Step 1: Understand the model description, causality, and directionality

Step 2: Check the data, categorical data, missing data, and outliers

Outlier is a data point that differs significantly from other observations. We can use the
standard deviation method and interquartile range (IQR) method.
Dummy variable takes only the value 0 or 1 to indicate the effect for categorical
variables.

Step 3: Simple Analysis — Check the effect comparing between dependent variable to
independent variable and independent variable to independent variable

Use scatter plots to check the correlation

Multicollinearity occurs when more than two independent variables are highly
correlated. We can use Variance Inflation Factor (VIF) to measure if VIF > 5 there is
highly correlated and if VIF > 10, then there is certainly multicollinearity among the
variables.
Interaction Term implies a change in the slope from one value to another value.

Step 4: Multiple Linear Regression — Check the model and the correct variables

Step 5: Residual Analysis

Check normal distribution and normality for the residuals.

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Step 6: Interpretation of Regression Output
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R-Squared is a statistical measure
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dependent variable is explained by the independent variables. Higher R-Squared value
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represents smaller differences
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