ASSIGNMENT ON

why a business person need to know about

correlation and regression

COURSE CODE: STS 101

Submitted to:

Mr. Golam Mohammad Forkan

Associate Professor
FBA
Eastern University

Submitted by:
Supti Banerjee
ID: 171200111
FBA
Eastern University
What is Regression and Correlation?

Regression: Regression analysis is a statistical tool to study the nature and

extent of functional relationship between two or more variables and to estimate

(or predict) the unknown values of dependent variable from the known values
of independent variable.

For example, it can be used to quantify the relative impacts of age, gender, and
diet (the predictor variables) on height (the outcome variable).

Correlation: 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. An example of positive correlation
would be height and weight.

why a business decision maker need to know about

Regression & Correlation?

In today’s business world we come across many activities, which are dependent
on each other. In businesses we see large number of problems involving the use
of two or more variables. Identifying these variables and its dependency helps
us in resolving the many problems. Many times there are problems or situations
where two variables seem to move in the same direction such as both are
increasing or decreasing. At times an increase in one variable is accompanied by
a decline in another.

Correlation is used to determine the relationship between data sets in business

and is widely used in financial analysis and to support decision making.
Regression analysis not only refers to the relationship between data sets but
also that if one data set changes, it will cause a corresponding change in the
other data set. Regression analysis is often used in sales forecasting, product,
and service development, predicting future market trends, and other use cases.
Correlation and regression analysis aids business leaders in making more
impactful predictions based on patterns in data. This technique can help guide
business processes, direction, and performance accordingly, resulting in
improved management, better customer experience strategies, and optimized
operations. Correlation and regression analysis combined paves the way for
modern approaches to business success by increasing profitability, reducing the
complexity and uncertainty of decision making, and increasing business
flexibility in ever-changing and evolving business environments.

The uses of Regression and Correlation: Correlation analysis is a form of

statistics that helps to determine the relationship between two variables where
a high correlation indicates a strong relationship, and a weak correlation
indicates that they are not closely related.

Uses of Regression Analysis:

 It provides estimates of values of the dependent variables from values of

independent variables.
 It is used to obtain a measure of the error involved in using the regression
line as a basis for estimation.
 With the help of regression analysis, we can obtain a measure of degree
of association or correlation that exists between the two variables.
 For business research, since most of the problems of the economic
analysis are based on cause and effect relationship.
Uses of correlations:

 Correlation analysis helps inn deriving precisely the degree and the
direction of such relationship.
 The effect of correlation is to reduce the range of uncertainty of our
prediction. The prediction based on correlation analysis will be more
reliable and near to reality.
 Correlation analysis contributes to the understanding of economic
behavior, aids in locating the critically important variables on which
others depend, may reveal to the economist the connections by which
disturbances spread and suggest to him the paths through which
stabilizing farces may become effective.
 For the business decision making process, show relationships between
variables like price and quantity demanded advertising expenditure and
sales promotion measures etc.
 The measure of coefficient of correlation is a relative measure of change.

Correlation and Regression in the Business Context

Correlation and Regression Analysis are used in business to forecast potential

outcomes so that businesses can make informed data-driven decisions based on
predicting the outcome of events.

The following demonstrates a few different businesses scenarios in which these

analytics techniques provide value for decision making.

 Predictive Analytics: Predicting risk and opportunities is one of the most

important aspects of correlation and regression analysis used in business
today, and is often used by data scientists and business analysts to
forecast future outcomes.
  Enhance Decision Making: Business decision maker rely on data analytics
to aid decision making with greater levels of accuracy and trustworthiness
and help to support management in testing hypotheses and developing
smarter business strategies.

 Reveal New Business Opportunities: Correlation and regression analysis

help to reveal new business opportunities that might not have otherwise
been available or that would have gone unnoticed by decision-makers,
revealing new insights that can be put to strategic use.

 Reduce Errors and Risk: It’s possible to test new theories, strategies, and
hypotheses and determine if they will be successful and applicable, which
results in fewer errors and reduced risks. This supports evidence-based
decision making instead of relying purely on past experience and business
intuition.

 Improved Management: present new marketing, and advertising

opportunities, tailor products, and services, and improve employee
productivity finding new opportunities to improve management
processes.

Benefits of Correlation and Regression for decision

making.
Correlation and Regression Analysis are forms of statistical analysis and have
been traditionally reserved for statisticians and mathematicians.

 Improve Operations: Improves business performance by impacting

operational efficiency, such as discovering innovative material
substitutions to reduce manufacturing costs.

 Sales Forecasting: Maximize profits by making adjustments to resources

and marketing strategies based on forecasted market trends.
  Analyzing Results: Accurately test decision making results to determine
how your hypothesis impacts your business.

 Improve Employee Efficiency: Connect employee behaviors to specific

software or technology implementations, and drive efficiency
improvements.

 Develop New Strategies: Bring to light previously undiscovered

relationships between data, such as customer demand increases based on
a specific sales event.

 Correct Mistakes: Analyze the findings of the decision maker decisions

and reveal the exact reasons behind the results.

So, that for any business decision making, the business decision maker need to
know above all the parts. For day-to-day business, the analysis of Regression and
correlation is very important for any business activity. The process of performing
a regression and correlation allows the business decision maker to confidently
determine which factors matter most, which factors can be ignored, and how
these factors influence each other.