CORRELATION AND LINEAR REGRESSION

Meila Rosanty Restutiani

H2501202028
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The sales database of a House agency in Bogor on March 2000

ID size lot size age bed room bath room near highway selling price ID size lot size age bed room bath roomnear highway
selling price
1 109 121 13 3 2 0 285 33 138 171 5 3 2 1 431
2 90 108 20 3 2 0 212 34 122 153 33 3 3 0 373
3 325 362 26 5 4 0 566 35 80 119 30 2 2 1 304
4 316 334 16 5 5 0 559 36 133 144 12 3 2 0 328
5 115 155 39 3 2 0 130 37 136 167 12 3 1 1 353
6 84 96 11 2 2 1 295
38 226 232 27 4 4 0 410
7 134 172 32 3 2 0 337
39 129 138 13 3 1 1 321
8 259 287 26 5 3 1 499
40 128 148 28 3 1 0 296
9 150 164 34 3 1 0 232
41 125 165 31 3 3 0 316
10 218 240 8 4 2 0 475
11 66 93 35 2 2 0 119 42 152 159 26 3 2 1 304
12 142 178 38 3 3 1 244 43 103 113 28 3 2 0 231
13 80 99 12 2 2 0 252 44 295 308 35 5 4 0 379
14 140 157 39 3 1 1 248 45 218 255 39 4 4 0 316
15 331 369 20 5 3 0 538 46 184 202 20 4 4 0 411
16 126 145 27 3 3 0 243 47 81 97 11 2 2 1 271
17 223 250 15 4 4 1 470 48 232 270 18 4 4 0 435
18 121 159 38 3 1 1 278 49 148 181 22 3 1 0 317
19 114 152 31 3 1 0 312 50 218 242 36 4 3 0 282
20 292 320 37 5 3 0 452 51 283 290 22 5 4 0 485
21 122 161 10 3 3 0 346 52 114 125 38 3 2 0 275
22 117 136 27 3 1 1 274 53 133 153 36 3 3 1 288
23 104 130 31 3 2 0 254
54 301 315 23 5 5 0 492
24 82 110 10 2 2 0 284
55 99 138 11 3 2 1 297
25 274 293 40 5 4 0 348
56 230 241 30 4 2 0 313
26 92 130 37 3 2 0 230
57 220 260 30 4 4 0 413
27 120 132 30 3 2 0 228
28 100 135 23 3 2 0 243 58 232 268 23 4 3 0 402
29 94 134 11 3 1 0 300 59 196 208 29 4 4 0 352
30 220 235 18 4 4 0 374 60 144 180 23 3 1 0 345
31 77 86 22 2 2 0 210 61 208 243 20 4 2 0 430
32 186 218 21 4 3 1 388 62 174 212 16 4 4 0 370
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Using the data:

1. Calculate the correlation coefficient between the attributes of the house
and the selling price. Explain the results!

2. Estimate a regression model with selling price as the dependent variable

and the attributes as the independent variables. Interpret the model!
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Using the data:

1. Calculate the correlation coefficient between the attributes of the house
and the selling price. Explain the results!
2. Estimate a regression model with selling price as the dependent variable
and the attributes as the independent variables. Interpret the model!
 3

Correlation Coefficient between Size and Selling price

The result of calculation using Minitab 19 software,

obtained correlation coefficient r= 0,821

The correlation coefficient of 0,821 indicates

strong positive linear correlation between size
and selling price.
As a size of the house increase, the selling
price of the house also increase
 3

Correlation Coefficient between Lot size and Selling price

The result of calculation using Minitab 19 software,

obtained correlation coefficient r= 0,831

The correlation coefficient of 0,831 indicates

strong positive linear correlation between Lot
size and selling price.

As a lot size of the house increase, the selling

price of the house also increase
 3

Correlation Coefficient between Age and Selling price

The result of calculation using Minitab 19 software,

obtained correlation coefficient r= -0,303

The correlation coefficient of -0,303 indicates

weak negative linear correlation between age
and selling price.
As an age of the house increase, the selling
price of the house is likely to decrease
 3

Correlation Coefficient between bed room and Selling price

The result of calculation using Minitab 19 software,

obtained correlation coefficient r= 0,775

The correlation coefficient of 0,775 indicates

strong positive linear correlation between bed
room and selling price.
As the more bed room of the house, the selling
price of the house is tend to increase
 3

Correlation Coefficient between bath room and Selling price

The result of calculation using Minitab 19 software,

obtained correlation coefficient r= 0,585

The correlation coefficient of 0,585 indicates

moderate positive linear correlation between
bath room and selling price.
As the more bath room of the house, the
selling price of the house is tend to increase
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Correlation Coefficient between near highway and Selling price

The result of calculation using Minitab 19 software,

obtained correlation coefficient r= -0,036

The correlation coefficient of -0,036 indicates

very weak almost no linear correlation between
bath room and selling price.
There are almost nothing happen if the house
near highway with the house selling price
The Regression Model

 
• 1= -0.201, suggesting that for every increase in 1 m2 of house size, the selling price of

the house drops by about 0.201 million, holding constant other variables.

• b= 1.282, suggesting that for every increase in 1 unit of lot size, the selling price of the

house rises by about 1.282 million, holding constant other variables.

• b= -3.837, suggesting that for every increase in 1 year of the house’s age, the selling

price of the house drops by about 3.837 million, holding constant other variables.

• b = 6.3, suggesting that for every 1 bed room increase, the selling price of the house

rises by about 6.3 million, holding constant other variables.

• b= 3.41, suggesting that for every 1 bath room increase, the selling price of the house

rises by about 3.41 million, holding constant other variables.

• b= 23.6, suggesting that if the house is near highway, the selling price of the house rises

by about 23.6 million, holding constant other variables.

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The Regression Model

 
Coefficient od Determination = 85,45% indicates that the
regression model explains approximately 85,45% of the total
variation in Selling price (Y) is explained by the changes in
other independent variable

 
At = 0.05, only lot size and age are statistically significant
because their corresponding p values < 0,05. Therefore, both of
lot size and age are individually useful in the prediction of
selling price
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The Regression Model

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