CHAPTER

6
CORRELATION AND
REGRESSION
CORRELATION AND REGRESSION
ANALYSIS
CORRELATION
• A statistical method used to determine whether a
relationship between variables exist.

REGRESSION
• A statistical method used to describe the nature
of the relationship between variables.
BIVARIATE DATA
STUDENT SCORE AVERAGE

1 39 87

2 37 87

3 42 92

4 19 69

5 49 100

6 40 90

7 23 72
SCATTER DIAGRAM
• A useful tool for checking the assumptions.
• A tool for analyzing relationships between two
variables for determining how closely the two
variables are related. One variable is plotted on
the horizontal axis and the other is plotted on the
vertical axis.
PEARSON PRODUCT – MOMENT
CORRELATION
•  The most widely used in statistics to measure the degree of the
relationship between the linear related variables. It is used to measure
the strength and direction of a linear correlation.

CORRELATION COEFFICIENT
• It is a measure of the linear strength of the association between two
variables.
 PERFECT POSITIVE CORRELATION
 PERFECT NEGATIVE CORRELATION
 POSITIVE CORRELATION
 NEGATIVE CORRELATION
 ZERO CORRELATION
NON-LINEAR CORRELATION
MAGNITUDE OF THE RELATIONSHIP
STRENGTH OF RELATIONSHIPS
No correlation ; no relationship

Very low correlation ; almost negligible relationship

Slight correlation ; definite but small relationship

Moderate correlation ; substantial relationship

High correlation ; marked relationship

Very high correlation ; very dependable relationship

Perfect correlation ; perfect relationship

TEST OF SIGNIFICANCE
• 
PROCEDURE FOR PEARSON PRODUCT-
MOMENT CORRELATION TEST
 
1. Set up the hypotheses.
2. Set the level of significance and degrees of freedom.
  𝑑 𝑓 =𝑛 − 2

3. Determine the critical values of t.

4. Calculate the value of Pearson’s r.
5. Calculate the value of t and determine the statistical decision .
6. Conclusion.  
 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:

Does it appear there is a relationship between atmospheric temperature and

sales? Compute the coefficient of correlation. Determine at the 0.05
significance level whether the correlation in the population is greater than
zero.
SCATTER PLOT
250

200

150
SALES (Y)

100

50

0
1 21 41 61 81 101
TEMPERATURE (X)
STEP 1. HYPOTHESES.
• 

STEP 2. LEVEL OF SIGNIFICANCE AND

DEGREE OF FREEDOM.
 
 STEP 3. Determine the critical values of .
 STEP 4. (PPMCC)
  𝞢
• 
STEP 5. DECISION RULE.
• 
 

 
8 .00>2.228
STEP 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.
SIMPLE LINEAR REGRESSION
ANALYSIS
REGRESSION ANALYSIS is a simple statistical tool used to
model the dependence of a variable on one (or more)
explanatory variables.
SIMPLE LINEAR REGRESSION is the least estimator of a
linear regression model with a single predictor.
Simple Linear Regression Model
•  =A+ BX
• Where A- y-intercept
• B-slope
• B=r sy/sx
• A= - B
Linear Regression
•It is a way to model the
relationship between two
variables
Primary Uses of Regression
• Forecasting
• Optimization
• Help managers predict future demand for their products
• Help fine- tune manufacturing and delivery processes
Find the regression line of X on Y
x 2 3 5 7 9 10 12 15
y 2 5 8 10 12 14 15 16
 =A +BX
•  r= 0.96 sy=4.98 sx=4.49
• B= r sy/sx
• A=-B= 10.25-(1.07)(7.88)=1.818=1.82
• B= (0.96)()=1.07
• =1.82 +1.07X -Equation of the Regression line
• =1.82 +1.07(8)=10.38 if X=8
• =1.82 +1.07(14)=16.8 if X=14
• =1.82 +1.07(8)=13.59 if X=11