CIA 3

Inspection of data and comprehensive reporting using Correlation,

Regression/Time Series Analysis

2120124 Kashish Kingrani

Business Statistics (BBA234)

Submitted to
Prof. Kiran Vazirani

BACHELOR OF BUSINESS ADMINISTRATION

DEPARTMENT OF MANAGEMENT STUDIES

Bengaluru, India
April, 2021

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 Acknowledgement

I would like to express my sincere gratitude towards Prof. Kiran Vazirani for providing me
with her valuable guidance, comments and suggestions throughout the course of this project.

I would also like to thank Christ University for giving me this amazing opportunity and all
the resources for the successful completion of this project.

2120124 Kashish Kingrani

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 Table of Content

S No. Content Page No.

1 Introduction to Dataset 4

2 Introduction to 5,6
Nestle
Britannia
3 Correlation 7,8

4 Probable error 9

5 Scatter diagram and Trend line 10

6 Forecasting of next 5 years 11,12,13

7 Interpretation and Conclusion 14

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 Introduction

Domain:

The domain chosen for the project is Consumer foods. The consumer goods sector is a
category of stocks and companies that relate to items purchased by individuals and
households rather than by manufacturers and industries. These companies make and sell
products that are intended for direct use by the buyers for their own use and enjoyment.

Objectives:

With this project I aim to achieve the following objectives:

 To be able to find out and correlate one or two variables of two companies.
 Establish a relationship between them and analyze the results properly
 To be able to forecast future trends by analyzing the results through time series
analysis/ regression equations.
 Be able to plot scatter diagrams and interpret trends in an effective manner.

Methods Used:

 Karl Pearson’s method of correlation

 Probable Error
 Scatter Diagram
 Time Series/Regression.

Dataset Description:

The dataset chosen is Opening Share Prices of Nestle and Britannia which belong to the
Consumer Foods industry. The financials are below.

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 Nestle

Nestlé S.A. is a Swiss multinational food and drink processing

conglomerate corporation headquartered in Vevey, Vaud, Switzerland. It
is the largest publicly held food company in the world, measured by
revenue and other metrics, since 2014. 

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 Britannia

Britannia Industries Limited is an Indian company specialized

in food industry, part of the Wadia Group headed by Nusli
Wadia. Founded in 1892 and headquartered in Kolkata, it is one
of India's oldest existing companies and best known for its biscuit products. 

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 Correlation

The correlation coefficient can be defined as a measure of the relationship between two
quantitative or qualitative variables, i.e., X and Y. It serves as a statistical tool that helps to
analyze and in turn, measure the degree of the linear relationship between the variables.

Karl Pearson’s Coefficient of Correlation:

The study of Karl Pearson Coefficient is an inevitable part of Statistics. Statistics is majorly
dependent on Karl Pearson Coefficient Correlation method. The Karl Pearson coefficient is
defined as a linear correlation that falls in the numeric range of -1 to +1.

 Dataset of Opening Share Price:

Year Nestle Britannia

2013 4990.4 250.98

2014 5310.15 462.46

2015 6355 920.1

2016 5850 1481.56

2017 6030 1448.86

2018 7880 2357.5

2019 11112 3129.9

2020 14819.95 3064.5

2021 18380 3580

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Calculation of Coefficient of Correlation:

X Y Dx= X-x Dy= Y-y DxDy Dx2 Dy2

4139.9 222.5 -4346.84 -1469.34 6386968 18895018 2158948.28

4990.4 250.98 -3496.34 -1440.86 5037722 12224393.4 2076066.01
5310.15 462.46 -3176.59 -1229.38 3905224 10090724 1511365.35
6355 920.1 -2131.74 -771.736 1645141 4544315.43 595576.454
5850 1481.56 -2636.74 -210.276 554443.1 6952397.83 44215.9962
6030 1448.86 -2456.74 -242.976 596928.9 6035571.43 59037.3366
7880 2357.5 -606.74 665.664 -403885 368133.428 443108.561
11112 3129.9 2625.26 1438.064 3775292 6891990.07 2068028.07
14819.95 3064.5 6333.21 1372.664 8693369 40109548.9 1884206.46
18380 3580 9893.26 1888.164 18680097 97876593.4 3565163.29
84867.4 16918.36 0 0 48871301 203988686 14405715.8

Mean: Total of observations/No. of observations

Mean of X: 84867.4/10
= 8486.74
Mean of Y: 16918.36/10
= 1691.836

Karl Pearson’s Coefficient of Correlation:

= ∑ Dx Dy
√ (∑ Dx2 ∑ Dy2)

= 48871301 / √ (203988686 * 14405715.8)

= 48871301 / 54208883.3765
= 0.9015367585
Since, r = 0.9015367585, there is a very high degree of correlation between X and Y.

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 Probable Error

Formula: 0.6745 (1-r2)

√n

= 0.6745 {1 – (0.9015367585)2}

√10

= 0.6745 {1 – 0.8127685269}

3.1622776602

= 0.6745 {0.1872314731}

3.1622776602

= 0.1262876286

3.1622776602

= 0.0399356547

Since the value of r is greater than the value of probable error, the coefficient of correlation is
significant.

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 Scatter Diagram

Scatter plot of X and Y

Year Price(Y) X XY X2
4000
2013 4990.4 -3 -14971.2 9
3500
2014 5310.15 -2 -10620.3 4
3000
2015 6355 -1 -6355 1
2500
2016 5850 0 0 0
2000
2017 6030 1 6030 1
1500
2018 7880 2 15760 4
1000 2019 11112 3 33336 9

500 2020 14819.95 4 59279.8 16

0 2021 18380 5 91900 25

2000 4000 6000 8000 10000 12000 14000 16000 18000 20000
Total 84867.4 5 157799.7 85

Forecasting

 Nestle:

Y = a +bx
a = ∑Y/n
= 84867.4/10
= 8486.74

b = ∑xy/n
= 157799.7/10

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= 15779.97

Forecasting of next 5 years:

2022: Yc = 84867.4 + 15779.97(6)
= 84867.4 + 94679.82
= 179547.22

2023: Yc = 84867.4 + 15779.97(7)

= 84867.4 + 110459.79
= 195327.19
2024: Yc = 84867.4 + 15779.97(8)
= 84867.4 + 126239.76
= 211107.16
2025: Yc = 84867.4 + 15779.97(9)
= 84867.4 + 142019.73
= 226887.13
2026: Yc = 84867.4 + 15779.97(10)
= 84867.4 + 157799.7
= 242667.1

 Britannia:

Year Price(Y) X XY X2

2013 250.98 -3 -752.94 9

2014 462.46 -2 -924.92 4

2015 920.1 -1 -920.1 1

2016 1481.56 0 0 0

2017 1448.86 1 1448.86 1

2018 2357.5 2 4715 4

2019 3129.9 3 9389.7 9

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 2020 3064.5 4 12258 16

2021 3580 5 17900 25

Total 16918.36 5 42223.6 85

Y = a +bx
a = ∑Y/n
= 16918.36/10
= 1691.836

b = ∑xy/n
= 42223.6/10
= 4222.36

Forecasting of next 5 years:

2022: Yc = 1691.83 + 4222.36(6)
= 1691.83 + 25334.16
= 27025.99
2023: Yc = 1691.83 + 4222.36(7)
= 1691.83 + 29556.52
= 31248.35
2024: Yc = 1691.83 + 4222.36(8)
= 1691.83 + 33778.88
= 35470.71
2025: Yc = 1691.83 + 4222.36(9)
= 1691.83 + 38001.24
= 39693.07
2026: Yc = 1691.83 + 4222.36(10)
= 1691.83 + 42223.6
= 43915.43

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 Interpretation

 The overall opening prices of Nestle are quite high than Britannia.
 By calculating the coefficient of Correlation by Karl Pearson’s Method, we get
0.9015367 which is a very high degree of correlation between the opening share
prices of the two brands.
 The Probable error is less than the coefficient of correlation which implies that the
above figure of correlation is quite significant and accurate.
 The trend line on the scatter diagram shows the high degree of correlation between the
share prices of the two brands.
 By calculating the forecasting trends through least squares method, we get that both
the variables increase over the period of 5 years although the figures are just predicted
so can’t rely upon.

Conclusion

We can see that the opening share prices of both the brands, Nestle and Britannia are
highly correlated and are predicted to be increased in the coming 5 years. This means that
both the companies share similar patterns in their growth in the Stock Exchange market.

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