Scatter Diagram

• The Dependent Variable is the

variable being predicted or
estimated.
• The Independent Variable
provides the basis for estimation
or it is the estimator.
• A Scatter Diagram is a chart that
portrays the relationship between
the two variables. 1
 This scatter plot locates pairs of observations of
advertising expenditures on the x-axis and sales
on the y -axis. We notice that Larger (smaller)
values of sales tend to be associated with larger
(smaller) values of advertising.

S c a tte rp lo t o f A d ve rtis ing E x p e n d iture s ( X ) a nd S a le s ( Y )

140

120

100
S a le s

80

60

40

20

0
0 10 20 30 40 50 2
A d ve rtis i ng
 Direct Linear

• The scatter of points tends to be

distributed around a positively sloped
straight line.
• The pairs of values of advertising
expenditures and sales are not located
exactly on a straight line.
• The scatter plot reveals a more or less
strong tendency rather than a precise
linear relationship.
• The line represents the nature of the
relationship on average.
3
Y
Inverse Linear

4
X
Y
Direct Nonlinear

X
5
• No association / No correlation

• Correlated ?
Y

X
6
 Perfect Negative Correlation

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9
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Y 5
4
3
2
1
0
0 1 2 3 4 5 6 7 8 9 10
X
 Perfect Positive Correlation

10
9
8
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5
Y4
3
2
1
0
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X
 Zero Correlation

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Y 5
4
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2
1
0
0 1 2 3 4 5 6 7 8 9 10
X