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Correlation and Regression

Correlation

A quantitative relationship between two interval or ratio


level variables

Explanatory
(Independent) Variable

Hours of Training
Shoe Size
Cigarettes smoked per day
Score on SAT
Height

Response
(Dependent) Variable

Number of Accidents
Height
Lung Capacity
Grade Point Average
IQ

What type of relationship exists between the two


variables and is the correlation significant?

Correlation
measures and describes the strength and direction of
the relationship
Bivariate techniques requires two variable scores
from the same individuals (dependent and
independent variables)
Multivariate when more than two independent
variables (e.g effect of advertising and prices on
sales)
Variables must be ratio or interval scale

Scatter Plots and Types of Correlation


x = hours of training (horizontal axis)
y = number of accidents (vertical axis)

Accidents

60
50
40
30
20
10
0
0

10 12 14 16 18 20

Hours of Training

Negative Correlationas x increases, y


decreases

Scatter Plots and Types of Correlation

GPA

x = SAT score
y = GPA
4.00
3.75
3.50
3.25
3.00
2.75
2.50
2.25
2.00
1.75
1.50
300 350 400 450 500 550 600 650 700 750 800

Math SAT

Positive Correlationas x increases, y increases

Scatter Plots and Types of Correlation

IQ

x = height

y = IQ

160
150
140
130
120
110
100
90
80
60

64

68

72

Height

No linear correlation

76

80

Scatter Plots and Types of Correlation


Strong, negative
relationship

but non-linear!

Correlation Coefficient r

A measure of the strength and direction of a linear


relationship between two variables

The range of r is from 1 to 1.


1
If r is close to 1
there is a strong
negative
correlation.

0
If r is close to
0 there is no
linear
correlation.

1
If r is close to
1 there is a
strong
positive
correlation.

Outliers.....
Outliers are dangerous

Here we have a spurious


correlation of r=0.68

without IBM, r=0.48

without IBM & GE,


r=0.21

Application

Final Grade

Final
Absences Grade
95
90
85
80
75
70
65
60
55
50
45
40

8
10
Absences
X

12

14

16

x
8
2
5
12
15
9
6

y
78
92
90
58
43
74
81

Computation of r
1
2
3
4
5
6
7

8
2
5
12
15
9
6

78
92
90
58
43
74
81

57 516

xy
624
184
450
696
645
666
486

x2
64
4
25
144
225
81
36

y2
6084
8464
8100
3364
1849
5476
6561

3751

579

39898

Hypothesis Test for Significance


r is the correlation coefficient for the sample. The
correlation coefficient for the population is

(rho).

For a two tail test for significance:


(The correlation is not significant)
(The correlation is significant)

The sampling distribution for r is a t-distribution


with n 2 d.f.
Standardized test
statistic

Test of Significance
The correlation between the number of times absent and a
final grade r = 0.975. There were seven pairs of data.Test the
significance of this correlation. Use
= 0.01.

1. Write the null and alternative hypothesis.


(The correlation is not significant)
(The correlation is significant)

2. State the level of significance.


= 0.01

3. Identify the sampling distribution.


A t-distribution with 5 degrees of freedom

Rejection Regions
Critical Values t0

t
4.032

4.032

df\p

0.40

0.25

0.10

0.05

0.025

0.01

0.005

0.0005

0.324920

1.000000

3.077684

6.313752

12.70620

31.82052

63.65674

636.6192

0.288675

0.816497

1.885618

2.919986

4.30265

6.96456

9.92484

31.5991

5. Find the rejection region. 3

0.276671

0.764892

1.637744

2.353363

3.18245

4.54070

5.84091

12.9240

0.270722

0.740697

1.533206

2.131847

2.77645

3.74695

4.60409

8.6103

0.267181

0.726687

1.475884

2.015048

2.57058

3.36493

4.03214

6.8688

4. Find the critical value.

6. Find the test statistic.

t
4.032

+4.032

7. Make your decision.


t = 9.811 falls in the rejection region. Reject the null hypothesis.

8. Interpret your decision.


There is a significant negative correlation between
the number of times absent and final grades.

The Line of Regression


Regression indicates the degree to which the variation in one
variable X, is related to or can be explained by the variation in
another variable Y
Once you know there is a significant linear correlation, you can
write an equation describing the relationship between the x and y
variables. This equation is called the line of regression or least
squares line.
The equation of a line may be written as y = mx + b
where m is the slope of the line and b is the yintercept.
The line of regression is:
The slope m is:
The y-intercept is:

(xi,yi)

= a data point
= a point on the line with the same x-value
= a residual
Best fitting straight line

260

revenue

250
240
230
220
210
200
190
180
1.5

2.0

Ad $

2.5

3.0

1
2
3
4
5
6
7

x
8
2
5
12
15
9
6

xy

y
78
92
90
58
43
74
81

624
184
450
696
645
666
486

57 516

3751

x2
64
4
25
144
225
81
36

y2
6084
8464
8100
3364
1849
5476
6561

579 39898

The line of regression is:

Write the equation of the


line of regression with
x = number of absences
and y = final grade.

Calculate m and b.

= 3.924x + 105.667

The Line of Regression

Final Grade

m = 3.924 and b = 105.667


The line of regression is:
95
90
85
80
75
70
65
60
55
50
45
40
0

10

12

14

16

Absences

Note that the point

= (8.143, 73.714) is on the line.

Predicting y Values
The regression line can be used to predict values of y
for values of x falling within the range of the data.
The regression equation for number of times absent and final grade is:

= 3.924x + 105.667
Use this equation to predict the expected grade for a student with
(a) 3 absences

(b) 12 absences

(a)

= 3.924(3) + 105.667 = 93.895

(b)

= 3.924(12) + 105.667 = 58.579

Strength of the Association


The coefficient of determination, r2, measures the strength of the
association and is the ratio of explained variation in y to the
total variation in y.

The correlation coefficient of number of times absent and


final grade is r = 0.975. The coefficient of determination is
r2 = (0.975)2 = 0.9506.
Interpretation: About 95% of the variation in final grades can
be explained by the number of times a student is absent. The
other 5% is unexplained and can be due to sampling error or
other variables such as intelligence, amount of time studied, etc.