What is a Linear Transformation?
A linear transformation is a change to a variable characterized by one or more of the following operations: adding a constant to the variable, subtracting a constant from the variable, multiplying the variable by a constant, and/or dividing the variable by a constant.
When a linear transformation is applied to a random variable, a new random variable is created. To illustrate, let X be a random variable, and let m and b be constants. Each of the following examples show how a linear transformation of X defines a new random variable Y.
Adding a constant: Y = X + b
Subtracting a constant: Y = X - b
Multiplying by a constant: Y = mX
Dividing by a constant: Y = X/m
Multiplying by a constant and adding a constant: Y = mX + b
Dividing by a constant and subtracting a constant: Y = X/m - b
Note: Suppose X and Z are variables, and the correlation between X and Z is equal to r. If a new variable Y is created by applying a linear transformation to X, then the correlation between Y and Z will also equal r.
How Linear Transformations Affect the Mean and Variance
Suppose a linear transformation is applied to the random variable X to create a new random variable Y. Then, the mean and variance of the new random variable Y are defined by the following equations.
Y = mX + b and Var(Y) = m2 * Var(X)
where m and b are constants, Y is the mean of Y, X is the mean of X, Var(Y) is the variance of Y, and Var(X) is the variance of X.
Note: The standard deviation (SD) of the transformed variable is equal to the square root of the variance. That is, SD(Y) = sqrt[ Var(Y) ].