TO FIND CORRELATION AND REGRESSION OF THE FOLLOWING DATA:

Here, TV ad Spend(X) is the independent variable and Sales(Y) is the dependent variable. The
data collected is of different Quarter and it is as follows:

Correlation is a statistical measure that expresses the extent to which two variables are
linearly related (meaning they change together at a constant rate). It's a common tool for
describing simple relationships without making a statement about cause and effect.

The sample correlation coefficient, r, quantifies the strength of the relationship. Correlations are
also tested for statistical significance.
Calculation of Correlation:

INTERPRETATION:
Correlation is a statistical measure that describes how two variables are related and indicates
that as one variable changes in value, the other variable tends to change in a specific direction.
Correlation is a statistical measure that quantifies the direction and strength of the relationship
between two numeric variables.
The correlation of 0.902663175 shows that there is positive correlation between TV ad Spend
incurred by the firm and net sales made by the company during the year. This shows that when
TV ad increases then there is increase in net sales also.

REGRESSION:

Regression Statistics of Y on X
INTERPRETATION:

Y = a + bX

In this equation:

 Y is the variable we are trying to predict. It is called the dependent variable because we are
assuming that Y is dependent on the X variable (the ‘independent’ variable).
 X is called the independent variable because we assume it is not dependent on Y. It is also
called the explanatory variable because it is supposed to “explain” what causes changes in
Y.
 B is the slope of the regression line. The slope reflects how large or small the change in Y
will be for a unit change in X.
 A is the intercept or the point at which the regression line will intercept the Y-axis.

The values of a and b form the heart of the regression model. The values of a and b are found
as the coefficients in any regression output.

X and Y are variables and will take on different values at different points in time. The values of
a and b are substituted in the regression equation to get the relationship between X and Y as
follows:

Y = 437.88 + 16.95*X

This can also be expressed in the context of the example or question making the relationship
more meaningful.

Sales = 437.88 + 16.95*Advertising budget

What this regression model indicates is that sales are dependent on the advertising budget.

If I spend $20 on advertising, I can expect to have sales of (Sales = 437.88+16.95*$20)

$776.88

If I spend $15 on advertising, I can expect to have sales of (Sales = 437.88 + 16.95*$15)

$692.13

If I spend $8on advertising, I can expect to have sales of (Sales = 437.88 + 16.95*$8)

$573.48

If x is been substituted as 20 then x comes out to be 776.88 .Thus this shows that if advertisement
cost incurred by TV ad Company is 20 then advertisement cost incurred by the company comes
out to be 776.88 . The equation shows that the coefficient for net sales is 16.94$. The coefficient
indicates that for every additional increase in advertisement expense, net sales increases by 16.94
units.

Regression Statistics of X on Y
INTERPRETATION:

X = a + bY

In this equation:

 X is the variable we are trying to predict. It is called the dependent variable because we are
assuming that X is dependent on the Y variable (the ‘independent’ variable).
 Y is called the independent variable because we assume it is not dependent on X. It is also
called the explanatory variable because it is supposed to “explain” what causes changes in
X.
 B is the slope of the regression line. The slope reflects how large or small the change in X
will be for a unit change in Y.
 A is the intercept or the point at which the regression line will intercept the Y-axis.

The values of a and b form the heart of the regression model. The values of a and b are found
as the coefficients in any regression output.

X and Y are variables and will take on different values at different points in time. The values of
a and b are substituted in the regression equation to get the relationship between X and Y as
follows:

X = -14.747 + 0.0480*Y

This can also be expressed in the context of the example or question making the relationship
more meaningful.

Advertising budget = -14.747 + 0.0480*Sales

What this regression model indicates is that sales are dependent on the advertising budget.

If I Sales is 900 on TV ads, I can expect to have sales of

(Advertising budget = -14.747 + 0.0480*900)

28.453
If y is been substituted as 900 then x comes out to be 28.453 .Thus this shows that if net sales

of TV ads is 900 then advertisement cost incurred by the company comes out to be 28.453. The

equation shows that the coefficient for advertisement expenditure is 0.0480$ the

coefficient indicates that for every additional increase in net sales, there is increase in

advertisement in by 0.0480 units

We can see that the Lower 95% is 12.31 and the Upper 95% is 21.58 in our example. What this
indicates is that while we believe that the coefficient for TV ads in our example is 16.95, there is
a 95% chance that it could be as low as 12.31 or as high as 21.58. Because this range does not
include a zero, we have confidence that the TV ads spend does impact our sales results.