Statistic Discussion Questions WEEK 6 - Essay Example

What is the purpose of using regression analysis? How may it be used to formulate strategies? Provide examples related to strategy formulation and implementationThe purpose of regression analysis is to generate an equation of a line amidst cluster points which show least deviation. “Error” is said to have occurred when the points deviate from the line. (Princeton University, 2007)One point from X axis, can denote approximately how much effect on Y there will be at a certain point. How is regression analysis used in forecasting?

Provide examples. (58 words)Since it has one dependant and the other independent variable, therefore, regression analysis can be used in forecasting as well. For example: If your company’s sales change with the change in GDP, then you can forecast that how much company’s sales are changing with per unit change in GDP, this will help in forecasting sales of the company. (Investopedia, 2009)What is the purpose of using correlation analysis? How may correlation analysis be used in business decisions or in relation to strategy formulation and implementation?

 Correlation is a method which helps in measuring the relationship between two variables. It tells us about how one variable will affect the other. Correlation lies between -1 to +1. If it is positive then both the variables are directly related and if it is negative then both the variables are inversely related. It helps in making strategies because it helps in forecasting how the business will be and what decisions need to be taken. (Investopedia, 2009) How may correlation analysis be misused to explain a cause-and-effect relationship?

 Some people think that when two events occur together, then they have cause-and-effect relationship according to which, one variable causes the change in the other. This might cause damage to a company and might lead to massive loss. For example, if a company invests somewhere thinking that the correlation was the cause-and-effect relation, then the company might have to suffer huge losses. (Experiment-Resources, 2008)Discuss the relationship between independent and dependent variables with regard to correlation and regression analysis.

What is the purpose of these terms?The dependant and independent variables are related to one another. It is assumed that for a certain amount of independent variable, there is a normally distributed amount of mean that shows the dependant variable. The equation these terms produce are best approximates and shows the functional relationship between the data observations. Princeton University, 2007. Introduction to Statistics. Retrieved from http://dss.princeton.edu/online_help/analysis/regression_intro.

htmInvestopedia, 2009. Regression basics for Business Analysis. Retrieved from http://www.investopedia.com/articles/financial-theory/09/regression-analysis-basics-business.asp#axzz1SP056e2XResearch Methods, 2002. Correlation. Retrieved from http://www.nvcc.edu/home/elanthier/methods/correlation.htmExperiment-Resources, 2008. Correlation and Causation. Retrieved from http://www.experiment-resources.com/correlation-and-causation.html