I want to use Excel to generate a random correlated Y from a known X. From another thread, I found the equation Y = r * X + E, where X is standardized and E is a random variable from normal distribution having mean 0 and sd = sqrt(1-r^2). I assume r is the correlation coefficient found using Excel's CORREL function. I also assume I can calculate E by using Excel's NORMDIST function.
Are my assumptions correct? If I have a known X, how do I "standardize" X?
Thanks for any help.