Correlation Analysis

Correlation analysis is applied in quantifying the association between two continuous variables, for example, an dependent and independent variable or among two independent variables.

Regression Analysis

Regression analysis refers to assessing the relationship between the outcome variable and one or more variables. The outcome variable is known as the dependent or response variable and the risk elements, and co-founders are known as predictors or independent variables. The dependent variable is shown by “y” and independent variables are shown by “x” in regression analysis.

The sample of a correlation coefficient is estimated in the correlation analysis. It ranges between -1 and +1, denoted by r and quantifies the strength and direction of the linear association among two variables. The correlation among two variables can either be positive, i.e. a higher level of one variable is related to a higher level of another or negative, i.e. a higher level of one variable is related to a lower level of the other.

The sign of the coefficient of correlation shows the direction of the association. The magnitude of the coefficient shows the strength of the association.

For example, a correlation of r = 0.8 indicates a positive and strong association among two variables, while a correlation of r = -0.3 shows a negative and weak association. A correlation near to zero shows the non-existence of linear association among two continuous variables.

Linear Regression

Linear regression is a linear approach to modelling the relationship between the scalar components and one or more independent variables. If the regression has one independent variable, then it is known as a simple linear regression. If it has more than one independent variable, then it is known as multiple linear regression. Linear regression only focuses on the conditional probability distribution of the given values rather than the joint probability distribution. In general, all the real world regressions models involve multiple predictors. So, the term linear regression often describes multivariate linear regression.

Correlation and Regression Differences

There are some differences between Correlation and regression.

• Correlation shows the quantity of the degree to which two variables are associated. It does not fix a line through the data points. You compute a correlation that shows how much one variable changes when the other remains constant. When r is 0.0, the relationship does not exist. When r is positive, one variable goes high as the other goes up. When r is negative, one variable goes high as the other goes down.

• Linear regression finds the best line that predicts y from x, but Correlation does not fit a line.

• Correlation is used when you measure both variables, while linear regression is mostly applied when x is a variable that is manipulated.

Comparison Between Correlation and Regression

Correlation and Regression Statistics

The degree of association is measured by “r” after its originator and a measure of linear association. Other complicated measures are used if a curved line is needed to represent the relationship.

The above graph represents the correlation.

The coefficient of correlation is measured on a scale that varies from +1 to -1 through 0. The complete correlation among two variables is represented by either +1 or -1. The correlation is positive when one variable increases and so does the other; while it is negative when one decreases as the other increases. The absence of correlation is described by 0.

Correlation Coefficient Formula

Let X and Y be the two random variables.

The population correlation coefficient for X and Y is given by the formula:

Where,

ρ_XY = Population correlation coefficient between X and Y
μ_X = Mean of the variable X
μ_Y = Mean of the variable Y
σ_X = Standard deviation of X
σ_Y = Standard deviation of Y
E = Expected value operator
Cov = Covariance

The above formulas can also be written as:

The sample correlation coefficient formula is:

The above formulas are used to find the correlation coefficient for the given data. Based on the value obtained through these formulas, we can determine how strong is the association between two variables.

Simple Linear Regression Equation

As we know, linear regression is used to model the relationship between two variables. Thus, a simple linear regression equation can be written as:
Y = a + bX
Where,

Y = Dependent variable

X = Independent variable

a = [(∑y)(∑x²) – (∑x)(∑xy)]/ [n(∑x²) – (∑x)²]

b = [n(∑xy) – (∑x)(∑y)]/ [n(∑x²) – (∑x)²]

Regression Coefficient

In the linear regression line, the equation is given by: 

Y = b₀ + b₁X 

Here b₀ is a constant and b₁ is the regression coefficient.

The formula for the regression coefficient is given below.

b₁ = ∑[(x_i – x)(y_i – y)]/ ∑[(x_i – x)²]

The observed data sets are given by x_i and y_i. x and y are the mean value of the respective variables.

We know that there are two regression equations and two coefficients of regression.

The regression coefficient of y and x formula is:

b_yx = r(σ_y/σ_x)

The regression coefficient of x on y formula is:

b_xy = r(σ_x/σ_y)

Where,

σ_x = Standard deviation of x

σ_y = Standard deviation of y

Some of the properties of a regression coefficient are listed below:

• The regression coefficient is denoted by b.
• The regression coefficient of y on x can be represented as b_yx. The regression coefficient of x on y can be represented as b_xy. If one of these regression coefficients is greater than 1, then the other will be less than 1.
• They are not independent of the change of scale. They will change in the regression coefficient if x and y are multiplied by any constant.
• The arithmetic mean of both regression coefficients is greater than or equal to the coefficient of correlation.
• The geometric mean between the two regression coefficients is equal to the correlation coefficient.

If b_xy is positive, then b_yx is also positive and vice versa.

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