INTRODUCTION

The goal of this project is to check if there is any relationship between Home Depot
Corporation (HD) revenue and new home sales in the United States. Our
assumption prior to starting this project is that Home Depots financial performance,
specifically its revenues, should be correlated to and perhaps predicted by various
external indicators and one of them is US home sales. For example, we suspect that
HD was subject to fluctuations in housing starts and/or housing sales. The notion
was that if more houses were started, or if more houses were sold in each year,
than HD would have superior financial performance than it would in years where
these indicators were lower.
DATA COLLECTION
We began our assessment by considering these range of indicators and a plan to
explore the relationships between unit sales and HD revenues. Though there are
several iterations of this analysis which can be considered however we are
eliminating unnecessary and irrelevant indicators for a simplified regression
equation.

100000
90000
80000
70000
60000

HD Revenue in Millions 50000

40000
30000
20000
10000
0
0 500 1,000 1,500

New US Home Sales

United States Census bureau www.census.gov

Home Depot web site www.homedepot.com
Independent (X) Variable is new US home sales
Dependent (Y) Variable is Home Depots annual revenue in Millions

We used yearly data from 1979 to 2016. We are comfortable with this data set
however, and believe that this 38-year period and 38 data points do provide a
reliable representation of the relationships we are exploring.
We chose these variables because we expected that there should be some
relationship to Home depot revenues. As a home improvement retail establishment,
Home Depot should feel the effects of fluctuations in the housing market.
We hypothesize that there is a significant relationship between new home sales and
Home Depots revenue. This hypothesis is supported by the following arguments:
a. HD is a supplier of exterior building materials that developers and
contractors can use in new homes
b. HD is a supplier of interior building materials that developers and
contractors can use in new homes
c. HD carries a wide range of household items such as cleaning supplies and
appliances that are purchased new home
We are interested in testing if there is a significant relationship and to do so our
hypothesis Question - Is there a significant relationship between Home
Depots revenue and new home sales in the United States?
Therefore:

Null Hypothesis (There is no relationship) = H0: = 0

Alternative Hypothesis (There is a relationship) = HA: 0

Statistical Test Used

We used regression analysis to test our hypothesis. Our independent variable is the
new home sales(X) and the dependent is the revenue of HD(Y). We conducted this
analysis at the 0.05 level of significance.
The regression output from Excel is as follows:

Best Fitting Line: = 26864.85 + 14.696X

o = 26864.84784
 o = 14.69672896
o n = 38
o 95% confidence interval for Beta B is (-33.31, 62.71)
o Since US Home sales P value is greater than .05 we accept null
hypothesis that there is no relationship between US home sales
and HD revenue
CONCLUSION

Based on our regression analysis, we retain the null hypothesis as P value is

greater than significance and conclude that there is a significant relationship
between Home Depots revenue and new home sales in the United States.

Interpretation of the slope: A 1 unit increase in X Increases Y by 14.696 on

average. This means that 1 additional new home sold in the US increases Home
Depots revenue by 14.696 Million Dollars
Correlation coefficient: 0.102923 which means the points on the line do not fit
well
The Correlation coefficient squared, or R 2 is 0.010593. This low value
demonstrates that only 1 percent of the variation in Home Depots sales is
explained by New US home sales.
Explanations for not being a relationship could include that more revenue comes
from renovating existing homes than building new homes