Alexis John S. Balboa & Jaylord T.

Apa

BSBA-2- MARKETING MANAGEMENT

ACTIVITY 4.1 CORRELATION AND REGRESSION ANALYSIS

Answer the following problem accordingly.

1. In an effort to determine whether any correlation exists between the prices of stocks of airlines, an
analyst sampled six days of activity of the stock market. Using the following prices of Delta stock and
Southwest stock, compute the coefficient correlation using the Pearson Correlation Coefficient and
Spearman’s rank Correlation coefficient.

PEARSON CORRELATION COEFFICIENT

DELTA (X) SOUTHWEST (Y) X2 Y2 XY
47.6 15.1 2,265.76 228.01 718.76
46.3 15.4 2,143.69 237.16 713.02
50.6 15.9 2,560.36 252.81 804.54
52.6 15.6 2,766.76 243.36 820.56
52.4 15.9 2,745.76 252.81 833.16
52.6 18.1 2,766.76 327.61 952.06
=302.1 =96 ΣX2 =15,249.09 ΣY2 = 1,541.76 ΣXY = 4,842.1

R= 6(4,842.1) – (302.1)(96) )
Sqrt{(6(15,249.09) – (302.1)2 } {6(1,541.76)-(96)2 }

= 29,052.6 – 29,001.6 )
Sqrt (91,494.54 – 91,264.41) – (9,250.56 -9,216)

= 51 )
Sqrt (230.13)(34.56)

= 51 )
89.18

=0.57 Moderate Correlation

SPEARMAN’S RANK CORRELATION COEFFICIENT
DELTA (X) SOUTHWEST R1 R2 D D2
(Y)
47.6 15.1 2 1 -1 1
46.3 15.4 1 2 1 1
50.6 15.9 3 4.5 1.5 2.25
52.6 15.6 5.5 3 -2.5 6.25
52.4 15.9 4 4.5 0.5 0.25
52.6 18.1 5.5 6 0.5 0.25
11

R= 1- 6ΣD2 )n(n2 – 1)

= 1- 6 (11)
6(62 – 1)

= 1- 66 6(36-1)

= 1- 66
210

= 1 – 0.314 r= 0.686 or 0.7 strong positive

correlation
2. A specialist in hospital administration stated that the number of FTEs(Full-time employees) in a
hospital can be estimated by counting the number of beds in the hospital (a common measure of
hospital size). A healthcare business researcher decided to develop a regression model in an attempt to
predict the number of FTEs of a hospital by the number of beds. She surveyed 12 hospitals and obtained
the following data. What is the linear regression model, y = ax + b where x is the number of beds and y is
the number of FTEs?
Number of Beds (X) FTEs (Y) X2 XY
23 69 529 1,587
29 95 841 2,755
29 102 841 2,958
35 118 1,225 4,130
42 126 1,764 5,292
46 125 2,116 5,750
50 138 2,500 6,900
54 178 2,916 9,612
64 156 4,096 9,984
66 184 4,356 12,144
76 176 5,776 13,376
78 225 6,084 17,550
Σ X = 592 Σ Y = 1,692 ΣX2 = 33,044 ΣXY = 92,038

a = {(ΣY)(ΣX2) –(ΣX)(ΣXY)} b= {n(ΣXY) –(ΣX)

(ΣY)}
{n (ΣX2) – (ΣX)2} {n (ΣX2) – (ΣX2)}

= {(1,692)(33,044) – (592)(92,038)} = {12 (92,038) – (592)(1,692)}

{12 (33,044) – (592)2 } {12 (33,044) – (33,044)}

= (55,910,448) – ( 54,486,496) = { (1,104,456) – (1,001,664) }

(396,528) – (350,464) (396,528) – (33,044)

= 1,423,952 = 102,792
46,064 363,484
= 30.91 = 0.28
Y = Ax + B
Y = 30.91 (number of beds) + 0.28