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204.1.2 Regression in Python

In last post we went through the concept of Correlation and implemented it using python on a dataset.

In this post we will walk from correlation to Regression.

From Correlation to Regression

  • Correlation is just a measure of association
  • It can’t be used for prediction.
  • Given the predictor variable, we can’t estimate the dependent variable.
  • In the air passengers example, given the promotion budget, we can’t get an estimated value of passengers
  • We need a model, an equation, a fit for the data.
  • That is known as regression line

What is Regression

  • A regression line is a mathematical formula that quantifies the general relation between a predictor/independent (or known variable x) and the target/dependent (or the unknown variable y)
  • Below is the regression line. If we have the data of x and y then we can build a model to generalize their relation
- What is the best fit for our data?
- The one which goes through the core of the data
- The one which minimizes the error


Regression Line fitting


Minimizing the error

  • The best line will have the minimum error
  • Some errors are positive and some errors are negative. Taking their sum is not a good idea
  • We can either minimize the squared sum of errors Or we can minimize the absolute sum of errors
  • Squared sum of errors is mathematically convenient to minimize
  • The method of minimizing squared sum of errors is called least squared method of regression

Least Squares Estimation

  • X: x1, x2, x3,… xn
  • Y: y1, y2, y3,… $y_n
  • Imagine a line through all the points
  • Deviation from each point (residual or error)
  • Square of the deviation
  • Minimizing sum of squares of deviation
  • β0 and β1 are obtained by minimizing the sum of the squared residuals

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