Basic Idea of Factor Analysis as a Data Reduction Method - Principal Components Analysis

The example described in Basic Idea of Factor Analysis as a Data Reduction Method, combining two correlated variables into one factor, illustrates the basic idea of factor analysis, or of principal components analysis to be precise (we will return to this later). If we extend the two-variable example to multiple variables, then the computations become more involved, but the basic principle of expressing two or more variables by a single factor remains the same.