CHAPTER 1

Correlation Analysis

We begin preparing to learn about multiple regression by looking at correlation 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 multiple regression model.

Take a look at the chart in Figure 1.1. This scatterplot shows 26 observations 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 a line through the data that would be a close fit to the data points. While we will see a more formal ...

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