Analyze categorical data to find significant relationships between variables.
The Chi-Squared (χ²) test is a versatile statistical tool for categorical data. It helps determine if the observed data significantly differs from what was expected. It has three primary uses, each answering a different kind of question.
Use this to compare the frequency distribution of a **single categorical variable** from one sample against a theoretical or expected distribution.
Example: A firm wants to know if profitable trades are uniformly distributed throughout the week. The null hypothesis is that each day has an equal number of profitable trades. The Chi-Squared Goodness of Fit test checks if the observed daily counts are significantly different from the expected counts.