Business Applications of Multiple Regression

CHAPTER 1

Correlation Analysis

We begin preparing to learn about multiple regression by looking at cor-

relation analysis. As you will see, the basic purpose of correlation analysis

is to tell you if two variables have enough of a relationship between them

to be included in a multiple regression model. Also, as we will see later,

correlation analysis can be used to help diagnose problems with a mul-

tiple regression model.

Take a look at the chart in Figure 1.1. This scatterplot shows 26 obser-

vations on 2 variables. These are actual data. Notice how the points seem

to almost form a line? These data have a strong correlation— that is, you

can imagine ...