The least squares regression line is the 'best' line for a set of points, but there will always be a least squares regression line; whether the line is 'close' to the points is another question. One way this is measured is with the correlation coefficient:

r = (SS_xy)/((SS_xx)(SS_yy))^.5

where the quantities on the right hand side were defined previously. For the previous example, r=13/(10 × 18)^.5 = .969.

Note that r will always be betwwen -1 and 1 (inclusive). When r=1, all the points lie on a line with positive slope; when r=-1 all the points lie on a line with negative slope; when r=0, the points are not easily identified with the line.

Coefficient of determination
Another measure of the closeness of the points to the regression line is the coefficient of determination.

r^2 = (SS_(y-hat)(y-hat))/SS_yy

which is the amount of the squared deviation which is explained by the points on the least squares regression line.

graph of y-hat=.1+1.3x
In the figure, it is the sum of the squares of the lengths of the cyan segments divided by the sum of the squares of the blue segments. For the previous example, SS_(y-hat)(y-hat) = (1.4-4)^2+(2.7-4)^2+(5.3-4)^2+(6.6-4)^2 = 16.9, so r^2 = 16.9/18 = .9389 (which is equal to .969^2). The magenta segments (y(i) - (y-hat(i))) are called the residuals or errors; *sum*(y(i)-(y-hat(i)))^2 = SSE. SS_yy = SS_(y-hat)(y-hat) + SSE (the total squared deviation can be partitioned into that which is explained by the regression line, and the error).

r^2 is between 0 and 1, inclusive.


Applets: The relation between correlation and the scatterplot of data is illustrated by Gary McClelland (I think the x and y spreads are equal). A game of guessing correlations from scatter plots has been built at University of Illinois (Champaign-Urbana).

Competencies: For the paired data set {(2,3), (3,5), (4,2), (3,6), (5,8)},
What are the coefficient of correlation and coefficient of determination?
Reflection: How is the correlation coefficient for y as a function of x related to the correlation coefficient for x as a function of y?

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