IE 322 CASE STUDY Group #:__28_____ Name :___Andre Fernandes________ Class #:__28______

Name: ____Lukas Gurrera___________ Class #:__40______ Name:_____Justin Rees________________ Class#:_72_______

Please SUBMIT THIS FILE as GROUP_#.pdf to ANGEL DROP BOX Part I: Correlation and Covariance
Task 1: Scatter Plot #1: Y(Market Share) vs. X1 (Absolute Unit Price) (5 Points)

SCATTER PLOT 1
0.3

0.25 SCATTER PLOT 1 Linear (SCATTER PLOT 1) R = 0.4502 0.15 36 42 48 54 60 66 72 78 84 90 96

0.2

Scatter Plot #2: Y(Market Share) vs. X2 (Relative Unit Price) (5 Points)

SCATTER PLOT 2
0.3 R = 0.6334 0.25 SCATTER PLOT 2 Linear (SCATTER PLOT 2)

0.2

0.15 0.2 0.4 0.6 0.8

Task 2: (12 Points) COV[X1, Y] = -.13699 COV[X2,Y]= .001002

CORR COEFF[X1, Y] = -.67098

CORR COEFF[X2, Y] = .795854

Show Sample Calculations Below for COV[X1, Y]; COV[X2,Y]; CORR COEFF[X1, Y]; CORR COEFF[X2, Y] (8 Points):

COV(X,Y) = E[XY] E[X]E[Y] E[XY] = (Xi *Yi) / 120 E[X] = Xi / 120 E[Y] = Yi / 120 COV(X1,Y) = 11.08048 48.48889*0.231341 COV(X1,Y) = -0.13699 COV(X2,Y) = 0.115627 0.495481*0.231341 COV(X2,Y) = 0.115627 CORR(X,Y) = COV(X,Y) / (x y) x = ((Xi Xaverage)2 / (n-1) ) y = ((Yi Yaverage)2 / (n-1) ) CORR(X1,Y) = -0.13699/10.88615 = -0.67098 CORR(X2,Y) = 0.115627/0.06714 = 0.795854 Built in Excel functions were used to readily calculate average and standard deviation of variables. Functions used included: E(x) =average (array of x) V(x) =STDEV.P(array of x) Built in Excel functions were used to validate covariance and correlation coefficient COV(X,Y) =COVAR(array of x, array of y) CORR(X,Y) =CORREL(array of x, array of y) 2

Task 3: Answer the Following Questions (12 Points)

(1) Comment on the scatter plots from Task #1. Explain what you can tell about the relationship between Y and X1 and Y and X2 based on the scatter plots. You may want to use the linear trendline and resulting R2 value to help you with this. (4 Points) We can observe that the trend line of the X1 and Y plot yields a negative slope, representing the negative correlation between both variables. In other words, as X1 increase, Y will decrease. The trend line on the X2 and Y plot yielded a positive slope, meaning that there is a positive relation between both variables and as X2 increases, so does the Y value .The R2 value represents the strength of the relationship between both variables since it is the square of the correlation coefficient, indicating that the higher the R2 value, the stronger the correlation coefficient. In other words, the higher the R2 value, a stronger change in Y is observed with a change in X variables.

(2) Comment on the Correlation Coefficients calculated and what they tell you about the relationship between Y and X1 and Y and X2. Is there a relationship? IF yes, is it positive or negative? Is it slight or strong? (4 Points) The correlation coefficient of X1 came out to be -.67098 and X2 equaled .795854 meaning they both have a relationship. X1 has a strong negative relationship because it is closer to -1 than 0, likewise X2 has a strong positive relationship because its value is closer to 1 than 0.

(3) Do you feel as though the relationships you discussed in (1) and (2) can be used to accurately predict the market share (i.e. the dependent variable). In other words, do you think the changes in the independent variables (X1, X2) can accurately predict the dependent variable (Y) ? (4 Points) The relationship allows us to predict a trend line but cannot accurately predict the market share because the values are based on the average of the trend line.

Part II: Regression Analysis

Task 1: (10 Points) Paste the Minitab Output below for Y vs. X1, X2
Regression Analysis: y versus x1, x2
The regression equation is y = 0.179 - 0.00105 x1 + 0.208 x2 Predictor Constant x1 x2 Coef 0.179129 -0.00104546 0.207687 SE Coef 0.000521 0.00000532 0.000863 T 343.67 -196.48 240.72 P 0.000 0.000 0.000

S = 0.000632182

R-Sq = 99.9%

R-Sq(adj) = 99.9%

Analysis of Variance Source Regression Residual Error Total Source x1 x2 DF 1 1 DF 2 117 119 SS 0.042162 0.000047 0.042209 MS 0.021081 0.000000 F 52748.26 P 0.000

Seq SS 0.019003 0.023159

Unusual Observations Obs 28 61 73 106 111 x1 92.2 46.0 84.9 88.8 86.0 y 0.194436 0.281676 0.195084 0.203899 0.178107 Fit 0.193747 0.280911 0.195358 0.203395 0.177150 SE Fit 0.000245 0.000203 0.000203 0.000235 0.000212 Residual 0.000689 0.000764 -0.000273 0.000504 0.000957 St Resid 1.18 1.28 -0.46 0.86 1.61 X X X X X

X denotes an observation whose X value gives it large leverage.

Task 2: Provide Answers to the Following Questions Based on the Minitab Output Above: (24 Points)

(1) Looking at the R2 value (R-sq) in the output for the regression analysis- please write a one sentence interpretation of this value in the context of this problem. (6 Points) The R^2 value equaled 99.9% indicating that the model is very accurate in determining the data variance.

(2) From the output above, would you say that the Absolute Price (X1) is a good predictor of the Market Share (Y)? Why or Why Not? Please make sure you try to answer this using the p value for the Absolute Price shown. (6 Points) Yes X1 is a good predictor of the market share. The regression analysis yielded a p value of 0.0 meaning that the model is very significant in determining the market share for X1 variable. With p equaling 0.0 we can say with a greater than 95% certainty that the model correctly predicts the market share.

(3) From the output above, would you say that the Relative Price (X2) is a good predictor of the Market Share (Y)? Why or Why Not? Please make sure you try to answer this using the p value for the Relative Price shown. (6 Points) Yes X2 is a good predictor of the market share. The regression analysis yielded a p value of 0.0 meaning that the model is very significant in determining the market share for X2 variable. With p equaling 0.0 we can say with a greater than 95% certainty that the model correctly predicts the market share.

(4) Do You feel as though the linear regression model (i.e. the regression equation) does a good job of estimating (Y)? Explain. (6 Points)
Yes the linear regression model does a good job of closely estimating Y values. By plugging different X values it is observed that the calculated Y value is very close to the actual market share value.

Part III: Matching Distributions

Task 1: Paste Your (3) Minitab Histograms Below (X1, X2, Y): (6 Points)
Histogram of x1
Normal 50
Mean StDev N 48.49 10.93 120

40

Frequency

30

20

10

30

40

50

60 x1

70

80

90

Histogram of x2
Normal 20
Mean StDev N 0.4955 0.06742 120

15

Frequency

10

0.35

0.40

0.45

0.50

0.55 x2

0.60

0.65

0.70

Histogram of y
Normal 30 25 20 15 10 5 0
Mean StDev N 0.2313 0.01883 120

Frequency

0.18

0.20

0.22 y

0.24

0.26

0.28

Task 2: Paste Your (9) Empirical CDF Plots Below (Normal, Exponential, Gamma): (9 Points) NORMAL
Empirical CDF of x1
Normal 100 80 60 40 20 0 20 30 40 50 60 x1 70 80 90 100
Mean StDev N 48.49 10.93 120

Percent

Empirical CDF of x2
Normal 100 80 60 40 20 0 0.3 0.4 0.5 x2 0.6 0.7
Mean StDev N 0.4955 0.06742 120

Percent

Empirical CDF of y
Normal 100 80 60 40 20 0 0.18 0.20 0.22 y 0.24 0.26 0.28
Mean StDev N 0.2313 0.01883 120

EXPONENTIAL
Empirical CDF of x1
Exponential 100 80 60 40 20 0 0 50 100 x1 150 200 250
Mean N 48.49 120

Percent

Percent

Empirical CDF of x2
Exponential 100 80 60 40 20 0 0.0 0.5 1.0 x2 1.5 2.0 2.5
Mean N 0.4955 120

Percent

Empirical CDF of y
Exponential 100 80 60 40 20 0 0.0 0.2 0.4 0.6 y 0.8 1.0 1.2
Mean N 0.2313 120

Percent

10

GAMMA
Empirical CDF of x1
Gamma 100 80 60 40 20 0 20 30 40 50 60 x1 70 80 90 100
Shape 24.23 Scale 2.001 N 120

Percent

Empirical CDF of x2
Gamma 100 80 60 40 20 0 0.3 0.4 0.5 x2 0.6 0.7
Shape Scale N 55.46 0.008934 120

Percent

11

Empirical CDF of y
Gamma 100 80 60 40 20 0 0.18 0.20 0.22 y 0.24 0.26 0.28
Shape Scale N 149.6 0.001546 120

Percent

12

Task 3: Provide Answers to the Following Questions: (9 Points)

(1) From your work in Task 1 & Task 2 above, Which of the distributions do you feel as through the Relative Market Share (Y) follows? (3 Points) Normal

(2) From your work in Task 1 & Task 2 above, which of the distributions do you feel as though the Absolute Unit Price (X1) follows? (3 Points) Gamma

(3) From your work in Task 1 & Task 2 above, which of the distributions do you feel as though the Relative Unit Price (X2) follows? (3 Points)
Gamma

*All results were obtained by first looking at how close of a fit to the Empirical CDF lines were and narrowing it down by observing the normal distribution trends.

GRADE: ________/ 100

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