A county real estate appraiser wants to develop a statistical model to predict the appraised value of houses in a section of the county called East Meadow. One of the many variables thought to be an important predictor of appraised value is the number of rooms in the house. Using data collected for a sample of n = 91 houses in East Meadow, the appraiser fit the data with the following simple, linear regression model: y = 91.80 + 19.72, where x = number of rooms and y = appraised value of the house (in thousands of dollars). Additionally, the appraiser determined the coefficient of correlation to be r = .93 and the coefficient of determination to be r = 86. Give a practical interpretation of the coefficient of correlation.
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
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