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Math 533

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GM533 PROJECT PART C: Regression and Correlation Analysis

1.

2. The equation of the ‘best fit’ line which describes the relationship between credit balance(y) vs size(X) is given as follows: y = 404.13x + 2581.9 3. The coefficient of correlation = 0.752483
Correlation coefficient, r is a measure of the degree of correlation or interdependence between two variables. The value of the correlation coefficient can range between -1 and +1. A negative value of r indicates an inverse relationship; a positive value of r indicates a direct relationship; a zero value of r indicates that the two variables are independent of each other. The closer r is to +1 or -1, the stronger is the relationship between the two variables.
For the given regression model, the correlation coefficient is very close to its ideal value of +1, thus indicating a strong positive correlation among the variables credit balance(y) vs size(X). 4. The coefficient of determination = 0.566773. Coefficient of determination, r2, is a measure of the amount of possible variability in the dependent variable that can be explained by its relationship to the independent variable. It is the square of the coefficient of correlation. The value of r2 ranges from 0 to 1 and higher the value, the better the fit. For the given regression model, about 94.81% of the variability in the dependent variable credit balance (Y) can be explained by the variability in the independent variable SIZE (X). 5. The test for the utility of the regression model has been performed in EXCEL. Please refer to the EXCEL sheet ‘Hypothesis Test’. 6. From the results of the hypothesis test, at level of significance 0.05, we can conclude that there is sufficient evidence of a significant correlation between credit balance(y) vs size(X). Thus, SIZE (X) can be used to…...

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