Relationship between Linea

for standardized variables - a

Correlation R Plotted on the X axis

R-squared in Dark Blue
SD of Error in Red

sqrt(1 - R-squared)
Correlation R R-squared Std Dev of Error
-1 1 0.00
-0.95 0.90 0.31
-0.9 0.81 0.44
-0.85 0.72 0.53
-0.8 0.64 0.60
-0.75 0.56 0.66
-0.7 0.49 0.71
-0.65 0.42 0.76
-0.6 0.36 0.80
-0.55 0.30 0.84
-0.5 0.25 0.87
-0.45 0.20 0.89
-0.4 0.16 0.92
-0.35 0.12 0.94
-0.3 0.09 0.95
-0.25 0.06 0.97
-0.2 0.04 0.98
-0.15 0.02 0.99
-0.1 0.01 0.99
-0.05 0.00 1.00
0.00 0.00 1.00
0.05 0.00 1.00
0.1 0.01 0.99
0.15 0.02 0.99
0.2 0.04 0.98
0.25 0.06 0.97
 0.3 0.09 0.95
0.35 0.12 0.94
0.4 0.16 0.92
0.45 0.20 0.89
0.5 0.25 0.87
0.55 0.30 0.84
0.6 0.36 0.80
0.65 0.42 0.76
0.7 0.49 0.71
0.75 0.56 0.66
0.8 0.64 0.60
0.85 0.72 0.53
0.9 0.81 0.44
0.95 0.90 0.31
1 1 undefined
p between Linear Correlation R and Model Error
ized variables - assuming continuous Gaussian probability distributions

as a Functi
1.

0.

0.

0.

0.

0.

0.

0.

0.

0.

0.
-1 -0.9 -0.8 -0.7 -0.6 -0.5 -0.4 -0.3 -0.2 -0.1

To determine the reliability of an individual forecast based on a linear regres

Using standardized variables (Z-scores) and assuming Gaussian probability d

Enter the value for individual x(i) = 0.8

and the linear correlation R = 0.5

The point forecast for y(i) will be = 0.4

Expressed in terms of a probability distribution, the probabilistic forecast fo

is a Gaussian distribution with mean = 0.4
and standard deviation = sqrt(1-R^2) = 0.87 also called the "model e

50% of the true values will be between -0.18

90% of the true values will be between -1.02

99% of the true values will be between -1.83

0.6744898
 Model Error
as a Function of Linear Correlation R
1.00

0.90

0.80

0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00
-0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

on a linear regression model and x(i)

sian probability distributions
 or R*x(i).

bilistic forecast for y(i)

alled the "model error"

and 0.98

and 1.82

and 2.63
R

R-squared 1
Std Dev of Error 0.00

0.4 0.5 0.6 0.7 0.8 0.9 1