Society of Actuaries (SOA) PA Practice Exam

What is a dendrogram best defined as?

1. A tree-based visualization of the resulting hierarchy of clusters

2. A statistical model predicting future outcomes

3. A linear regression analysis technique

4. A method for measuring regression coefficients

The correct answer is: A tree-based visualization of the resulting hierarchy of clusters

A dendrogram is best defined as a tree-based visualization of the resulting hierarchy of clusters. This type of diagram is commonly used in hierarchical clustering, a method where data points are grouped into clusters based on their similarities. The vertical lines in a dendrogram represent the distance or dissimilarity between clusters, while the branches indicate how the clusters are related at different levels of merging. The structure of a dendrogram allows for a visual analysis of the clustering process, making it easier to interpret the relationships between the data points and how they are grouped. It effectively communicates complex information about the hierarchical structure of the dataset, illustrating how individual items cluster together at various thresholds of similarity. In contrast to the other choices, a statistical model predicting future outcomes refers to predictive modeling rather than clustering. Linear regression analysis involves estimating relationships among variables, which does not inherently involve the visualization of clusters or hierarchies. Similarly, measuring regression coefficients pertains to assessing the strength of relationships in regression analysis, which does not relate to the visual representation of clustering data.