Course Instructor: Syed Junaid ali

Submitted by : Sofia
Roll no: HC-2394
Course Title: Business statistics II
Semester : BBA-3
Department : Management Sciences.
Scatter Plots and Correlation:

A scatter plot is a graph of the ordered pairs (x, y) of numbers consisting of the independent variable
x and the dependent variable y.

In Statistics, Linear regression refers to a model that can show relationship between two variables
and how one can impact the other. In essence, it involves showing how the variation in the
“dependent variable” can be captured by change in the “independent variables”.

Linear Regression is a very powerful statistical technique and can be used to generate insights on
consumer behaviour, understanding business and factors influencing profitability. Linear regressions
can be used in business to evaluate trends and make estimates or forecasts. For example, if a
company’s sales have increased steadily every month for the past few years, by conducting a linear
analysis on the sales data with monthly sales, the company could forecast sales in future months.

Regression Equation:
Now that we know how the relative relationship between the two variables is calculated, we can
develop a regression equation to forecast or predict the variable we desire. Below is the formula for
a simple linear regression. The “y” is the value we are trying to forecast, the “b” is the slope of the
regression line, the “x” is the value of our independent value, and the “a” represents the y-intercept.
The regression equation simply describes the relationship between the dependent variable (y) and
the independent variable (x).

y = bx + a
Coefficient of Determination and Standard Error of the Estimate:
■ The total variation is the sum of the squares of the vertical distances each point is from the mean.

■ The total variation can be divided into two parts: that which is attributed to the relationship of x
and y, and that which is due to chance.

Coefficient of Determination:
The coefficient of determination is the ratio of the explained variation to the total variation. The
symbol for the coefficient of determination is r ². Another way to arrive at the value for r² is to
square the correlation coefficient.

Standard Error of the Estimate:

The standard error of estimate, denoted by Sest is the standard deviation of the observed y values
about the predicted y’ values. The formula for the standard error of estimate is: