BACHELOR OF COMMERCE IN ITM

ANALYTICAL TECHNIQUES IT – UNIT 6

Prepared by: Dr H.Matsongoni
6. PREDICTION (CORRELATION AND REGRESSION)
Scatter diagram

A scatter plot is a graph that may be used to represent the relationship between two
variables—also referred to as a scatter diagram

Dependent and Independent Variable

A dependent variable is the variable to be predicted or explained in a regression

model.
This variable is assumed to be functionally related to the independent variable.

An independent variable is the variable related to the dependent variable in a

regression equation.
The independent variable is used in a regression model to estimate the value of the
dependent variable.
CORRELATION AND REGRESSION
Two Variable Relationships
Types of relationships
i. Linear
ii. Curvilinear
iii. No relationship
Y

X
(a) Linear
CORRELATION
The correlation coefficient is a quantitative measure of the strength of the linear
relationship between two variables.

The correlation ranges from + 1 to - 1. A correlation of  1 indicates a perfect linear

relationship, whereas a correlation of 0 indicates no linear relationship.

SAMPLE CORRELATION COEFFICIENT

r
 ( x  x )( y  y )
[ ( x  x ) ][ ( y  y )
2 2
]
where:
r = Sample correlation coefficient
n = Sample size
x = Value of the independent variable
y = Value of the dependent variable
CORRELATIONSHIP
SAMPLE CORRELATION COEFFICIENT

or the algebraic equivalent:

n xy   x  y
r
[ n( x 2 )  ( x ) 2 ][n( y 2 )  ( y ) 2 ]
CORRELATION BETWEEN THE GRADE AND MATHS
SCORE
Grade mathscore
y x yx y2 x2
65 39 2,535 4,225 1521
78 43 3,354 6,084 1849
52 21 1,092 2,704 441
82 64 5,248 6,724 4096
92 57 5,244 8,464 3249
89 47 4,183 7,921 2209
73 28 2,044 5,329 784
98 75 7,350 9,604 5625
56 34 1,904 3,136 1156
75 52 3,900 5,625 2704
CORRELATION - SOLUTION

n  xy   x  y
r 
[ n(  x 2 )  (  x ) 2 ][n(  y 2 )  (  y ) 2 ]

10(36,854)  460(760)
r 
[10( 23,634)  ( 460) 2 ][10(59,816)  (760) 2 ]
 0.84 Excel Correlation Output

Grade Math Score

Grade 1
Math Score 0.839785887 1

Correlation between Math Score and Grade

THANK YOU