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I am a bit confused about the relationship between Pearson's $r$ and the Coefficient of Determination $R^2$.

$$ r = \frac{\sum\limits_{i = 1}^n (x_i - \overline x)(y_i - \overline y)}{\sqrt{\sum\limits_{i = 1}^n (x_i - \overline x)^2(y_i - \overline y)^2}} $$

$$ R^2 = 1 - \frac{\sum\limits_{i = 1}^n (x_i - y_i)^2}{\sum\limits_{i = 1}^n (x_i - \overline x)^2} $$

Let $y$ be the prediction and $x$ be the actual values, and $\overline y$ and $\overline x$ their means.

Most explanations I have read says that $R^2$ can be derived by squaring the Pearson's $r$, and hence the name. However, using the formulas given above, then a squaring of $r$ does not equal $R^2$; at least for the data I have tried with.

Are the formulas wrong, or what is happening?

Wikipedia have a vague statement here: When an intercept is included, then $r^2$ is simply the square of the sample correlation coefficient (i.e., r).

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    $\begingroup$ Your notation is quite confusing. $x$ is normally used for a regressor rather than for the actual values. Actual values are normally denoted $y$ which you use for fitted values. Fitted values are normally denoted $\hat y$. In addition, the first denominator is wrong. You should have a product of two roots, one of variance of $x$ and another of variance of $y$ (using your notation). $\endgroup$ – Richard Hardy Feb 7 '18 at 16:37
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Your confusion lies in the fact that this only works if $x_i = \hat{y_i}$, where $\hat{y_i}$ are the OLS predicted values for $y$ based on $x$ (i.e. linear regression of $y$ on $x$). Try running this regression and using $\hat{y}$ instead of $x$ and it'll work.

The short version is that for this to work, $x$ needs to satisfy several criteria (e.g. $\sum x_i(y_i - x_i) = 0$, etc), which are satisfied when $x_i = \hat{y_i}$.

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  • $\begingroup$ Sorry, you're right. I fixed it :) $\endgroup$ – Felipe Gerard Feb 7 '18 at 17:21

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