what is the line of best fit 
line of best fit refers to a line through a scatter plot of data points that best expresses the relationship between those points statisticians typically use the least squares method sometimes known as ordinary least squares or ols to arrive at the geometric equation for the line either through manual calculations or by using software a straight line will result from a simple linear regression analysis of two or more independent variables a multiple regression involving several related variables can produce a curved line in some cases investopedia eliana rodgersunderstanding the line of best fitthe line of best fit estimates a straight line that minimizes the distance between itself and where observations fall in some data set the line of best fit is used to show a trend or correlation between the dependent variable and independent variable s it can be depicted visually or as a mathematical expression line of best fit is one of the most important concepts in regression analysis regression refers to a quantitative measure of the relationship between one or more independent variables and a resulting dependent variable regression is of use to professionals in a wide range of fields from science and public service to financial analysis line of best fit and regression analysisto perform a regression analysis a statistician collects a set of data points each including a complete set of dependent and independent variables for example the dependent variable could be a firm s stock price and the independent variables could be the standard and poor s 500 index and the national unemployment rate assuming that the stock is not listed in the s p 500 the sample set could be each of these three data sets for the past 20 years on a chart these data points would appear as a scatter plot a set of points that may or may not appear to be organized along any line if a linear pattern is apparent it may be possible to sketch a line of best fit that minimizes the distance of those points from that line if no organizing axis is visually apparent regression analysis can generate a line based on the least squares method this method builds the line which minimizes the squared distance of each point from the line of best fit to determine the formula for this line the statistician enters these three results for the past 20 years into a regression software application the software produces a linear formula that expresses the causal relationship between the s p 500 the unemployment rate and the stock price of the company in question this equation is the formula for the line of best fit it is a predictive tool providing analysts and traders with a mechanism to project the firm s future stock price based on those two independent variables 