# correlation
and regression

david hornby

**Scattergrams are useful and the value of simple visual
inspection is most important in determining a trend between two
variables, whether or **

**not there is a
reasonable correlation between them. However, it is better if a more
objective and quantitative measure can be used to measure **

**the degree of
correlation. The "correlation coefficient" is a useful measure of
correlation and "regression analysis" allows the construction of **

**a regression equation
which can be used to predict future values and rents.**

**THE CORRELATION
COEFFICIENT (r) AND COEFFICIENT OF DETERMINATION (r**^{2})

**The purpose of
correlation analysis is to analyze the degree of relationship among the
values of 2 or more variables. **

**The measure of
correlation between 2 variables can be measured with "r**^{2}",
the "coefficient of determination":

** Perfect positive
correlation: r2 = +1**

** No correlation: r2 =
0**

** Perfect negative
correlation: r2 = -1**