Basic Statistics Concepts

Updated on January 5, 2024
Article byAswathi Jayachandran
Edited byAlfina
Reviewed byDheeraj Vaidya, CFA, FRM

What Are The Basic Statistics Concepts?

Basic statistics concepts are the fundamentals that help in understanding the subject. These concepts aid in collecting, summarizing, analyzing, interpreting, and drawing conclusions. Knowing the basics helps invested parties choose the best method or procedure to reach the desired results.

Basic statistics concepts

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Statistics from a broader perspective helps in understanding and correlating variables (output, price, demand, and supply) in an economy with economic theories. Therefore, understanding concepts helps in providing substantial proof to support the claims. In addition, statistical data can reveal success or failure factors associated with existing government policies and help in planning them in the future.

Key Takeaways

  • Basic statistics concepts are the fundamentals that help in understanding statistics at a deeper level. These concepts help collect, summarize, read, and draw conclusions.
  • When users are aware of the basics, they choose the best method or procedure to get the desired outcome.
  • Descriptive statistics summarize or characterize a set of observations, the most fundamental statistics subfield. Inferential statistics is a field that interprets or makes inferences about a set of observations.
  • Common concepts include population, sample and parameter, measures of Central tendency, variance, covariance and standard deviation, regression, skewness, and ANOVA.

Basic Statistics Concepts Explained

Basic statistics concepts refer to the fundamental elements of statistics. A collection of mathematical techniques known as statistics summarizes and analyzes observations. These observations, which are frequently categorical or numerical information about particular individuals or objects—are data. One can view statistics from two perspectives – descriptive and inferential.

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Descriptive statistics summarize or characterize a set of observations, the most fundamental statistics subfield. At the same time, inferential statistics is a field that interprets or makes inferences about a set of observations. There are also other common concepts statisticians use in the subject, and some of them are as follows:

#1 – Population, Sample, And Parameter

Population refers to the members of the group that a study takes. The sample is a part of the population taken for analysis, while the parameter is the numerical measure that describes the characteristics of a population set. Therefore, it is the value that provides necessary information about the target population.

#2 – Measures Of Central Tendency

The three indicators of central tendency are the mean, median, and mode. One can determine the central value of the given set of data (grouped and ungrouped) using the three measures of central tendency.

#3 – Variance, Covariance, And Standard Deviation

One can utilize the concept of variance as an intermediary for the standard deviation computation. The standard deviation is termed the square root of variance. Similarly, covariance quantifies the relationship between two variables.

#4 – Regression

In the majority of statistical analyses involving two variables, the concept of regression is studied in addition to the correlation concept. In regression, one of the variables could impact one another. Regression does not treat the two variables symmetrically, although the correlation does.

#5 – Skewness In Statistics

In statistics, skewness is a metric for finding the probability distribution asymmetry. That is, it calculates the deviation from the normal distribution curve for a specific data collection. Skewed distribution values might be positive, negative, or zero.

#6 – ANOVA Statistics

Analysis of Variance, or ANOVA, is a term that refers to a group of statistical models that are employed to calculate the difference in mean for the specified set of data.

Eight Basic Statistics Concepts For Data Science

Data science employs statistics, and there are many concepts involved; some of them are given below:

#1 – Probability

Probability measures the chances of events happening. It is a way of predicting outcomes, and decisions can be made based on favorable outcomes or to make the outcomes favorable.

#2 – Standard Deviation

A standard deviation measures how much data deviates from the mean. The standard deviation is low if the data falls into a range reasonably close to the mean.

#3 – Dimension Reduction

It controls the number of random variables by setting parameters and data research features. This looks into the data entered in the analysis and streamlines the process of creating an efficient algorithm.

#4 – Bayesian Statistics

It predicts the occurrence of an event in the future by considering the factors that will be true in the future.

#5 – Hypotheses Testing

Testing hypotheses entails making an inference based on data and then putting that inference to the test with new data. Re-sampling and result comparison are occasionally included in data science hypothesis testing.

#6 – Variability

Variability refers to the distance between data points within a distribution and their distance from its center. Percentiles, Interquartile Range (IQR), and quartiles help understand variability.

#7 – Relationship Between Variables

Relationships between variables can be determined by causality, covariance, and correlation. The relationship between two events in the data set where one event is influenced by the other is known as causality. Covariance is the quantitative measurement of the combined variability in the data set between two or more variables. It is the normalized form of covariance; correlation measures the link between two variables and has a range of -1 to 1.

 #8 – Probability Distribution

It is a statistical concept that describes a random variable’s all possible values and probabilities within a specific range. The concept can be better understood with the concepts of the discrete probability distribution, binomial distribution, and Poisson distribution.

A discrete probability distribution is a discrete distribution that aims to describe the probability of the occurrence of a discrete, finite outcome. The concept of Bernoulli distribution is one such type. A random variable with a Bernoulli distribution has a single trial and two possible outcomes: success (1 with probability p) and failure (0 with probability (1-p)).

In a series of n independent trials, each with just 2 possible successes (1 with probability p) and failure (0 with probability (1-p)). The distribution of successes is known as a binomial distribution.

Poisson distribution is the distribution that indicates the likelihood that a set number of events, k, will occur at a known constant average rate, independent of time, within a fixed time interval.


Let us check out these examples to get a better idea:

Example #1

Suppose David wanted to know the number of students who scored above 90% in math and how their class was doing compared to the previous batches. He, however, did not know where to start or how to start, as he did not know the procedure or the terms used to find the answers. He then looked into the subject’s basic concepts to understand the criteria needed to approach the question and find the answers.

Example #2

A Deloitte survey revealed that statistical data analysis helped them make better decisions and enabled them to identify key strategic initiatives. The data helped them analyze the areas that needed improvement and build customer relationships. In the world of digital technology, data plays an important role, and data analysis helps get such outcomes. Statistics makes extracting valuable insights from it and understanding the fundamentals of the subject easy.

Frequently Asked Questions (FAQs)

1. Do you use statistics in finance?

Yes, from a broader perspective, it helps understand the economy and the country’s growth. From a narrow perspective, statistics helps determine a company’s growth, profitability, and consumer preferences and make better managerial and investment decisions. Individually speaking, it can determine earning and spending habits.

2. What is the application of statistics in accounting and finance?

Statistics help in understanding the economy’s, country’s, and individual company’s growth, along with profitability and consumer preferences. In accounting, it forecasts consumption, cash flow, earnings, etc. At the same time, for an individual, the subject helps in tracking expenses and income. Overall, it helps with decision-making in all areas.

3. What is the importance of statistics in banking?

The data and the analysis of it help facilitate decision-making. It is most helpful in the manufacturing and sales areas of a company. The data points show where the company is headed and whether the investment made is profitable or if a change of direction is needed.

This article has been a guide to what are Basic Statistics Concepts. We explain widely used basic statistics concepts along with examples. You may also find some useful articles here –

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