Correlation coefficient and the

residual
In the last section we talked about the regression line, and how it was the
line that best represented the data in a scatterplot. In this section, we’re
going to get technical about different measurements related to the
regression line.

Correlation coefficient, r
The correlation coefficient, denoted with r, tells us how strong the
relationship is between x and y. It’s given by

n − 1 ∑ ( sx ) ( sy )
1 xi − x̄ yi − ȳ
r=

Notice that in this formula for correlation coefficient, we have the values
(xi − x̄)/sx and (yi − ȳ)/sy, where sx and sy are the standard deviations with
respect to x and y, and x̄ and ȳ are the means of x and y. Therefore (xi − x̄)/sx
and (yi − ȳ)/sy are the z-scores for x and y, which means we could also write
the correlation coefficient as

1
n − 1 ∑ xi yi
r= (z )(z )

The value of the correlation coefficient will always fall within the interval
[−1,1]. If r = − 1, it indicates that a regression line with a negative slope will
perfectly describe the data. If r = 1, it indicates that a regression line with a
positive slope will perfectly describe the data. If r = 0, then we can say that

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a line doesn’t describe the data well at all. In other words, the data may
just be a big blob (no association), or sharply parabolic. In other words, the
relationship is nonlinear.

Don’t confuse a value of r = − 1 with a slope of −1. A correlation coefficient

of r = − 1 does not mean the slope of the regression line is −1. It simply
means that some line with a negative slope (we’re not sure what the slope
is, we just know it’s negative) perfectly describes the data.

“Perfectly describes the data” means that all of the data points lie exactly
on the regression line. In other words, the closer r is to −1 or 1 (or the
further it is away from 0, in either direction), the stronger the linear
relationship. If r is close to 0, it means the data shows a weaker linear
relationship.

Example

Using the data set from the last section, find the correlation coefficient.

x y

0 0.8

2 1.0

4 0.2

6 0.2

8 2.0

10 0.8

12 0.6

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First, we need to find both means, x̄ and ȳ,

0 + 2 + 4 + 6 + 8 + 10 + 12 42
x̄ = = =6
7 7

0.8 + 1.0 + 0.2 + 0.2 + 2.0 + 0.8 + 0.6 5.6

ȳ = = = 0.8
7 7

and both standard deviations sx and sy.

7
∑i=1 (xi − x̄)2 36 + 16 + 4 + 0 + 4 + 16 + 36
sx = = = 16 ≈ 4.3205
7−1 6

7
∑i=1 (yi − ȳ)2 0 + 0.04 + 0.36 + 0.36 + 1.44 + 0 + 0.04
sy = = ≈ 0.6110
7−1 6

Then if we plug these values for x̄, ȳ, sx, and sy, plus the points from the
data set, into the formula for the correlation coefficient, we get

n − 1 ∑ ( sx ) ( sy )
1 xi − x̄ yi − ȳ
r=

7 − 1 [( 4.3205 ) ( 0.6110 ) ( 4.3205 ) ( 0.6110 )

1 0−6 0.8 − 0.8 2−6 1.0 − 0.8
r= +

( 4.3205 ) ( 0.6110 ) ( 4.3205 ) ( 0.6110 ) ( 4.3205 ) ( 0.6110 )

4−6 0.2 − 0.8 6−6 0.2 − 0.8 8−6 2.0 − 0.8
+ + +

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 ( 4.3205 ) ( 0.6110 ) ( 4.3205 ) ( 0.6110 )]
10 − 6 0.8 − 0.8 12 − 6 0.6 − 0.8
+ +

6 [( 4.3205 ) ( 0.6110 ) ( 4.3205 ) ( 0.6110 )

1 6 0 4 0.2
r= − + −

( 4.3205 ) ( 0.6110 ) ( 4.3205 ) ( 0.6110 ) ( 4.3205 ) ( 0.6110 )

2 0.6 0 0.6 2 1.2
+ − − + − +

( 4.3205 ) ( 0.6110 ) ( 4.3205 ) ( 0.6110 )]

4 0 6 0.2
+ + −

6 [ 4.3205 ( 0.6110 ) 4.3205 ( 0.6110 )

1 4 0.2 2 0.6
r= − +

4.3205 ( 0.6110 ) 4.3205 ( 0.6110 )]

2 1.2 6 0.2
+ −

6 ( 2.6398 2.6398 2.6398 2.6398 )

1 0.8 1.2 2.4 1.2
r= − + + −

6 ( 2.6398 )
1 1.6
r=

1.6
r=
15.8390

r ≈ 0.1010

This positive correlation coefficient tells us that the regression line will
have a positive slope. The fact that the positive value is much closer to 0

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than it is to 1 tells us that the data is very loosely correlated, or that it has
a weak linear relationship. And if we look at a scatterplot of the data that
includes the regression line, we can see how this is true.

2.0

1.6

1.2

0.8

0.4

0
2 4 6 8 10 12

In this graph, the regression line has a positive slope, but the data is
scattered far from the regression line, with several outliers, such that the
relationship is weak.

In general, the data set has a

• strong negative correlation when −1 < r < − 0.7

• moderate negative correlation when −0.7 < r < − 0.3

• weak negative correlation when −0.3 < r < 0

• weak positive correlation when 0 < r < 0.3

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 • moderate positive correlation when 0.3 < r < 0.7

• strong positive correlation when 0.7 < r < 1

Residual, e
The residual for any data point is the difference between the actual value
of the data point and the predicted value of the same data point that we
would have gotten from the regression line.

2.0

1.6 actual value

1.2

0.8

0.4 predicted value

0
2 4 6 8 10 12

The blue lines in the chart represent the residual for each point. Notice
that the absolute value of the residual is the distance from the predicted
value on the line to the actual value of the point. The point (8,2) will have a
large residual because it’s far from the regression line, and the point
(10,0.8) will have a small residual because it’s close to the regression line.

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If the data point is below the line, the residual will be negative; if the data
point is above the line, the residual will be positive. In other words, to find
the residual, we use the formula

residual = actual − predicted

The residual then is the vertical distance between the actual data point
and the predicted value. Many times we use the variable e to represent the
residual (because we also call the residual the error), and we already know
that we represent the regression line with y,̂ which means we can also
state the residual formula as

e = y − ŷ

Now that we know about the residual, we can characterize the regression
line in a slightly different way than we have so far.

For any regression line, the sum of the residuals is always 0,

∑
e=0

and the mean of the residuals is also always 0.

ē = 0

If we have the equation of the regression line, we can do a simple linear

regression analysis by creating a chart that includes the actual values, the
predicted values, and the residuals. We do this by charting the given x and
y values, then we can evaluate the regression line at each x-value to get
the predicted value ŷ (“y-hat”), and find the difference between y and ŷ to
get the residual, e.

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If we use the same data set we’ve been working with, then the equation of
the regression line is

y = 0.0143x + 0.7143

and we can do the simple linear regression analysis by filling in the chart.

x Actual Predicted e

0 0.8 0.7143 0.0857

2 1.0 0.7429 0.2571

4 0.2 0.7715 -0.5715

6 0.2 0.8001 -0.6001

8 2.0 0.8287 1.1713

10 0.8 0.8573 -0.0573

12 0.6 0.8859 -0.2859

Notice how, if we compare the chart to the scatterplot with the regression
line, the negative residuals correspond to points below the regression line,
and the positive residuals correspond to points above the regression line.

If we make a new scatterplot, with the independent variable along the

horizontal axis, and the residuals along the vertical axis, notice what
happens to the regression line.

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 1.5

1.2

0.9

0.6
Residual, e

0.3

-0.3

-0.6

-0.9
2 4 6 8 10 12

Independent variable, x

This should make sense, since we said that the sum and mean of the
residuals are both always 0. Whenever this graph produces a random
pattern of points that are spread out below 0 and above 0, that tells us that
a linear regression model will be a good fit for the data.

On the other hand, if the pattern of points in this plot is non-random, for
instance, if it follows a u-shaped parabolic pattern, then a linear regression
model will not be a good fit for the data.

Minimizing residuals
To find the very best-fitting line that shows the trend in the data (the
regression line), it makes sense that we want to minimize all the residual
values, because doing so would minimize all the distances, as a group, of
each data point from the line-of-best-fit.

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In order to minimize the residual, which would mean to find the equation
of the very best-fitting line, we actually want to minimize

(en)2
∑

where en is the residual for each of the given data points.

We square the residuals so that the positive and negative values of the
residuals do not equal a value close to 0 when they’re summed together,
which can happen in some data sets when we have residuals evenly
spaced both above and below the line of best fit. Squaring them takes out
the negative values and keeps them from canceling each other out so that
all the residuals can be minimized.

2.0

1.6

1.2

0.8

0.4

0
2 4 6 8 10 12

This process of trying to minimize residuals by minimizing the squares of

the residuals, is where we get the names least-squares-line, line of least
squares, and least-squares regression. We’re trying to minimize the area
of the squares.

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