Linear Regression and

Correlation Analysis
Simple Correlation Analysis

Correlation analysis is used to measure

strength of the association (linear
relationship) between two variables
❖ Only concerned with strength of the
relationship (weak or strong)
❖ No causal effect is implied
In a simple relationship, there are two
variables:
1. independent variable , also called an
explanatory variable
2. dependent variable, also called a response
variable.
Example:
A manager may wish to see whether the number
of years the salespeople have been working for the
company has anything to do with the amount of
sales they make.
• Independent variable: years of experience
• Dependent variable: amount of sales.
The independent and dependent variables can be
plotted on a graph called a scatter plot.

A scatter plot (or scatter diagram) is used

to show the relationship between two
variables
 Characteristics of Relationship
1. Form (linear is most common)
 Scatter Plot Examples
Linear relationships Curvilinear relationships

y y

x x

y y

x x
 Characteristics of Relationship

2. Direction (negative or positive)

•A positive relationship exists when both

variables increase or decrease at the same time.
(ex: hours studying and exam scores)

•In a negative relationship, as one variable

increases, the other variable decreases, and vice
versa. (ex: hours playing online games and exam
scores)
 Is the correlation between these variables
positive or negative
▪ Motivation and Academic success
▪ Crime rate and Unemployment rate
▪ College stress and academic success
▪ Education of Parents and Number of children
▪ Salary and job satisfaction
▪ Anxiety and test performance
▪ Verbal ability and proficiency test performance
▪ Teacher quality and student success
▪ Social support and isolation
9
 Scatter Plot Examples
Positive relationships Negative relationships

y y

x x
 Characteristics of Relationship
3. Strength (weak or strong)
 Scatter Plot Examples
Strong relationships Weak relationships

y y

x x

y y

x x
Scatter Plot Examples
No relationship

x
• The scatter plot is a visual way to
describe the nature of the relationship
between 2 variables.
• Aside from scatter plot a measure called
the correlation coefficient can be used to
determine the strength of the linear
relationship between two variables.
 Correlation Coefficient
(continued)

• The population correlation coefficient

ρ (rho) measures the strength of the
association between the variables
• The sample correlation coefficient r is
an estimate of ρ and is used to
measure the strength of the linear
relationship in the sample observations
Pearson Correlation Coefficient
 Features of r
• Range between -1 and 1
• The closer to -1, the stronger the
negative linear relationship
• The closer to 1, the stronger the positive
linear relationship
• The closer to 0, the weaker the linear
relationship
 Examples of Approximate
r Values
y y y

x x x
r = -1 r = -.6 r=0
y y

x x
r = +.3 r = +1
 Linear Regression Analysis
Regression Analysis deals with the estimation of
one variable based on the changes or movements of
the other variable. It is used to predict, estimate, or
forecast the value of the dependent variable when
the measurements or values of an independent
variable are known.