x
• Status: Solved
• Priority: Medium
• Security: Public
• Views: 2248

Interpret Excel's Linear Trend Line

So I'm trying out Excel's Trendline feature for charts and I'm wondering how to interpret it.  I plotted out Sales Conversion Rates for 2 years and added a Linear Trendline in Excel.  I read that the closer the r squared value is to 1 the more accurate the trend is.  The r squared values I'm getting are all close to 0.  Does that mean the trend of the line is not accurate?  How do I interpret r squared value?  Thanks.
0
error_prone
2 Solutions

Commented:
The R-square value is an indicator of how well the model fits the data (e.g., an R-square close to 1.0 indicates that we have accounted for almost all of the variability with the variables specified in the model).

In other words your 0 (zero) means that your trend is not accurate.
0

Commented:
error_prone,More to the point, an r-squared of close to zero means that the regression model has basically no predictive value, and that your independent variable and dependent variables are wholly unrelated.Patrick
0

Author Commented:
Can you give me some real world hypothetical examples if let's say you plotted sales of fruits across a time series and the R squared value was close to zero?
0

VBA DeveloperCommented:
>>How do I interpret r squared value?

FWIW, Microsoft explains the R-squared value:

R-squared value: A number from 0 to 1  that reveals how closely the estimated values for the trendline  correspond to your actual data. A trendline is most reliable when its R-squared value is at or near 1. Also known as the coefficient of determination.
0

Author Commented:
So basically the line drawn across a Sales Over Time chart has no relationship if the R squared value is 0? Ok.
0

Commented:
It is something like:

Sales
Year01 Q01         10
Year01 Q02         20
Year01 Q03         30
Year01 Q04         40
Year02 Q01         90
Year02 Q02         45
Year02 Q03          5
Year02 Q04          80
Year03 Q01          20
Year03 Q02          120
Year03 Q03          10

There is not a relationship between time and sales
0

Author Commented:
Ok, I accidentally closed out the question when I meant to award points!
0

Author Commented:
I accidentally closed out the question when I meant to award points!
0

Author Commented:
It's not letting me split points.  This is the second time trying...
0
Question has a verified solution.

Are you are experiencing a similar issue? Get a personalized answer when you ask a related question.

Have a better answer? Share it in a comment.