CORRELATION

& REGRESSION ANALYSIS

James Bernhardt P. Perpetua, LPT
CORRELATION
A statistical method used to determine whether a
relationship between variables exist.
 REGRESSION
ANALYSIS
A statistical method used to describe the nature of
the relationship between variables, that is, either
positive or negative, linear or nonlinear.
Basic Concepts
Simple Relationship. There are two variables – an independent
variable (explanatory variable or predictor variable) and a
dependent variable (response variable)
Multiple Relationship. Also known as multiple regression, two or
more independent variables are used to predict the dependent
variable.
Positive Relationship. Exists when either variables increase at the
same time or both decrease at the same time.
Negative Relationship. As one variable increases, the other
variables decreases or vice versa
Pearson Product-Moment Correlation
(Pearson’s r Correlation)

 The most widely used in statistics to measure the degree of

relationship between linear variables. This requires both
variables to be normally distributed. Correlation refers to the
departure of two random variables from independence.
For example:
In stock market, if we want to measure how products are
related to each other, Pearson’s r is used to measure the degree
of relationship between to products.
Pearson’s r Formula:

 
 CORRELATION COEFFICIENT

 Pearson’s product-moment correlation

coefficient or simple correlation
coefficient (Pearson’s r) is a measure of
the linear strength of the association
between two variables. The values of the
correlation coefficient varies between +1
and -1. When the coefficient lies around
±1, then it is said to be a perfect degree
of association between two variables.
Summary of correlation coefficient and strength of
relationship:

0.00 - no correlation, no relationship

±0.01 to ±0.20 - very low correlation, almost negligible relationship
±0.21 to ±0.40 - slight correlation, definite but small relationship
±0.41 to ±0.70 - moderate correlation, substantial relationship
±0.71 to ±0.90 - high correlation, marked relationship
±0.91 to ±0.99 - very high correlation, very dependable relationship
±1.00 - perfect correlation, perfect relationship
Test of Significance.

 
Assumptions in Pearson’s r and Procedure

 
 Assumptions in Pearson’s r and Procedure

 
EXAMPLE 1

The owner of a chain of fruit shake stores would like to study the
correlation between atmospheric temperature and sales during the
summer season. A random sample of 12 days is selected with the results
given as follows:
DAY 1 2 3 4 5 6 7 8 9 10 11 12

Temperature (F) 79 76 78 84 90 83 93 94 97 85 88 82

Total Sales (Units) 147 143 147 168 206 155 192 211 209 187 200 150
Example

 
 Example

Day
  1 79 147 6,241 21,609 11,613
2 76 143 5,776 20,449 10,868
3 78 147 6,084 21,609 11,466
4 84 168 7,056 28,224 14,112
5 90 206 8,100 42,436 18,540
6 83 155 6,889 24,025 12,865
7 93 192 8,649 36,864 17,856
8 94 211 8,836 44,521 19,834
9 97 209 9,409 43,681 20,273
10 85 187 7,225 34,969 15,895
11 88 200 7,744 40,000 17,600
12 82 150 6,624 22,500 12,300
TOTAL 1,029 2,115 88,733 380,887 183,222
Example

 
Example

6. Conclusion
Since the null hypothesis has been rejected, we can conclude that there is
evidence that shows significant association between the atmospheric temperature
and the total sales of fruit shake.
SOFTWARE SOLVING
THRU EXCEL AND SPSS
T-TABLE
Z-TABLE
Z-TABLE