ACCTG 1 Lecture Notes - Lecture 15: Scatter Plot
Document Summary
We believe there may be some association between two variables, x and y. Collect a sample of n pairs of corresponding values of x and y then plot a graph! Examples: consumption of fuel and distance travelled positive, consumption of ice cream and temperature positive, sales of barbecue charcoal and rainfall in mm negative. The simplest type of relationship is the straight line. The sample linear correlation coefficient, r: measures the strength and direction of a linear relationship. r n n n. Positive values of r indicate positive linear association. Negative values of r indicate negative linear association: the values of r lie in the range - 1 r 1 always. The closer r is to -1 or 1 the stronger is the linear association. The values -1 and 1 indicate perfect linear association. Note: r is dimensionless - i. e. it has no units. Coefficient of determination: r2 the square of the correlation coefficient.
