# L2: Lecture notes Regression and Correlation

```Descriptive Statistics: regression and
correlation
Aim: what is the relation between two (or
more) quantitative variables?
A scatterdiagram of two variables x and y is
a plot of all observed points (xi, yi):
Terminology (simple linear regression):
x = the independent variable (can often be
y = the dependent (or response) variable:
must be measured/observed.
(If y depends on 2 or more independent
variables x: multiple linear regression)
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Interpretation:
 a linear relation if the points tend to group
around a straight line.
 a linear relation is called positive (“large
values of y coincide with large values of x
and vice versa”) of negative.
 Beware of clusters: separate groups of
points in the scatter diagram.
De correlation coefficient r is a measure of
the strength of a linear relationship of the
variables x and y, based on n observations
(x1, y1), ... ,(xn, yn):
Definition:
Formula for computations:
 n = is the number of observations (xi, yi)

and are the sample mean and
standard deviation of the xi`s and yi`s.
Properties r:
1. -1 ≤ r ≤ +1
2. r = -1 or r = 1: the relation is strictly linear
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3. r is not resistant (sensitive for outliers)
4. r does not depend on the unit of
measurement of x or y ( r is scaleless)
Interpretation of te value of r:
 r = 0: no linear relation
 r close to 0: weak linear relation
 r = +1: strictly positive linear relation
 r = -1: strictly negative linear relation
 r close to +1 (-1): strong positive (negative)
linear relation
If there seems to be a linear relation we use
the Method of least squares to fit a line to the
observed points: the sum of all squared
(vertical) distances of the points to the line
y = ax + b is minimized.
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The resulting line
is called the
(least squares) regression line or fitted line,
a and b are called the least squares estimates:
the y-intercept b = regression constant and
the slope
a = regression coefficient.
The predicted response for given x* is
 Interpolation: if x* is within the range of
the observations.
 Extrapolation: if x* is outside the range,
e.g. in case of time series: predicting future
values.
Residual: the (vertical) distance between the
observed point (xi, yi) and (xi, ) on the line:
=
 Sum and mean of the residuals ei are 0
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 s 2  n1-2  ei 2 estimates the variance in the
distances towards the regression line.
Residual diagram: graph of all points (xi, ei):
Possible comments on residual and/or overall
diagram:
 Is there a pattern of the residuals/points
indicating a non-linear relation?
 Are there outliers among the residuals?
(use the 1.5&times;IQD-rule to determine outliers)
 Is/are there influential observation(s),
e.g. a deviant x- or y-value
r2 is called the coefficient of determination:
The interpretation of r2 is “the percentage of
the variation of the y-values that can be
explained by the linear relation
”
Correlation: cause or consequence?
a strong relation between two variables does
not always indicate a causal connection,
e.g.: a third (hidden) variable can be related to
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both. Specially designed experiments can
reveal these relations.
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```