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Simple Linear Regression and Correlation Analysis

This document discusses simple linear regression and correlation analysis. It defines regression analysis as estimating the relationship between variables, with a focus on the relationship between a dependent and independent variable. It provides an example of ice cream sales versus temperature. Key concepts covered include scatter plots, trend lines, the purpose of regression to determine trends and forecasting, the least squares regression line (LSRL) which minimizes differences between actual and predicted y-values, and determining the equation and graph of the LSRL. Correlation analysis determines the degree that two variables change together, and correlation coefficients can range from 0 to 1, with higher values indicating stronger correlation.

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Gregorio Gamboa Maniti II
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50 views20 pages

Simple Linear Regression and Correlation Analysis

This document discusses simple linear regression and correlation analysis. It defines regression analysis as estimating the relationship between variables, with a focus on the relationship between a dependent and independent variable. It provides an example of ice cream sales versus temperature. Key concepts covered include scatter plots, trend lines, the purpose of regression to determine trends and forecasting, the least squares regression line (LSRL) which minimizes differences between actual and predicted y-values, and determining the equation and graph of the LSRL. Correlation analysis determines the degree that two variables change together, and correlation coefficients can range from 0 to 1, with higher values indicating stronger correlation.

Uploaded by

Gregorio Gamboa Maniti II
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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SIMPLE LINEAR

REGRESSION AND
CORRELATION
ANALYSIS
ADVANCED STATISTICS
REGRESSION ANALYSIS

 In statistics, regression analysis is a statistical


process for estimating the relationships among
variables. It includes many techniques for
modeling and analyzing several variables, when
the focus is on the relationship between a
dependent variable and one or more
independent variables.
Example: ice cream sales VS. temperature on
that day
SAMPLE DATA
The local ice cream shop keeps
track of how much ice cream
they sell versus the noon
temperature on that day. Here
are their figures for the last 12
days:
SCATTER PLOT

A graph is drawn in
two axes: the vertical
axis and the horizontal
axis, each representing
one of the two
variables. One of the
variables is the
dependent variable,
the other the
independent variable.
THE TREND LINE

For the line to be


a good trend
line:

1. The line
approximates
the general
direction of
the points.
2. The line
passes
through the
points.
PURPOSE OF REGRESSION ANALYSIS

 To determine the trend as two variables which are assumed to be


related change over time, that is to say whether the trend is rising or
falling.
 Once the trend has been established, it can be used to determine
the value of one variable when the value of the other variable is
given or assumed. If this is done outside or beyond the time frame,
that is to say, in the future, then the process is referred to as
forecasting.
PURPOSE OF CORRELATION
ANALYSIS
 To determine how closely, or to what degree the two variables are
changing or moving together.
 If equal amounts of change in one variable bring just about the
same change in the other variable, then we say that the two
variables are closely correlated.
 If changes in one variable does not show any clear pattern of
change in the other variable, then the variables are said to be
poorly correlated.
LEAST SQUARE REGRESSION LINE
(LSRL)
 The LSRL is the best fitting line in the scatter plot.
LSRL
DETERMINING THE EQUATION OF
THE LSRL
𝑌 = 𝑎 + 𝑏𝑋
where:
Y – the dependent variable
X – the independent variable
a – is the point on the vertical axis
which the line passes
b – the slope of the line
DETERMINING THE EQUATION OF
THE LSRL
 To determine a (intercept):
σ 𝑌 σ 𝑋 2 − σ 𝑋 σ 𝑋𝑌
𝑎=
𝑁 σ 𝑋2 − σ 𝑋 2

 To determine b (slope):
𝑁 σ 𝑋𝑌 − σ 𝑋 σ 𝑌
𝑏=
𝑁 σ 𝑋2 − σ 𝑋 2
THE GRAPH OF THE LSRL

 To determine the graph of the LSRL:


1. Identify two points of the LSRL using the
lowest value and the highest value of X
and solve for Y.
2. Plot the two points in the coordinate
plane.
3. Connect the two points and draw the
LSRL.
Least Squares 13

 1. ‘Best Fit’ Means Difference Between Actual Y Values &


Predicted Y Values Are a Minimum. But Positive Differences Off-Set
Negative. So square errors!

 2. LS Minimizes the Sum of the Squared Differences (errors) (SSE)

    ˆ
n n
Yi  Yˆi
2
2
i
i 1 i 1
Least Squares Graphically 14

n
LS minimizes   i   1   2   3   4
 2  2  2  2  2

i 1
Y Y2   0   1X 2   2
^4
^2
^1 ^3
  
Yi   0   1X i
X
CORRELATION ANALYSIS

 DEGREES OF CORRELATION BETWEEN TWO VARIABLES MAY BE


CLASSIFIED INTO FIVE GENERAL CATEGORIES:
CORRELATION COEFFICIENT

𝑁(σ 𝑋𝑌) − (σ 𝑋)(σ 𝑌)


𝑟=
2
𝑁(σ 𝑋 2 ) − (σ 𝑋) 𝑁(σ 𝑌 2 ) − (σ 𝑌)2
INTERPRETATION OF r

ABSOLUTE VALUE OF r INTERPRETATION


(DEGREE OF CORRELATION)

0.91 to 1.0 Very high

0.71 to 0.9 High

0.41 to 0.7 Moderate

0.21 to 0.4 Small

Less than 0.2 Negligible


SAMPLE PROBLEM
Y X X^2 XY Y^2
Board Exam CPA GWA 1st - 4th
Period Name Batch RATING Year

May-12 Manalac, Melandrew V. 2011 66.29 88.23

Delos Santos,
Oct-11 Christopher M. 2011 48.29 90.93

Oct-11 Flora, Jeannie Rose E. 2011 65.29 89.47

Oct-11 Santos, Ian M. 2011 64.14 90.07

Oct-12 Moreno, Bryan R. 2011 74.71 89.05

Oct-11 Corpuz, Jahziel R. 2011 73.43 90.51

Oct-11 David, Anna Rose M. 2011 73.14 91.13

Σ
DETERMINE THE FOLLOWING

 Scatter Diagram
 Trend Line
 Equation of the LSRL
 Draw the LSRL
 Correlation coefficient and interpretation
END OF PRESENTATION

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