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# logistic regression

##### Linear regression vs logistic regression – Detailed analysis with examples

In this blog, we are going to learn the differences and similarities between linear regression and logistic regression.

Regression is a statistical technique used in the fields of finance, investing, and other disciplines that aim to establish the nature and strength of the relationship between a single dependent variable (often represented by Y) and a number of independent variables (known as independent variables).

Forecasting and prediction both require regression analysis. There is a lot of overlap between this and machine learning. This statistical approach is employed in a variety of industries, including

Financial: Understanding stock price trends, making price predictions, and assessing insurance risk.

Marketing: Analyze the success of marketing initiatives and project product pricing and sales.

Manufacturing: Assess the relationships between the variables that define a better engine and its performance.

Medicine: To produce generic medications for ailments, forecast the various medication combinations.

The most popular variation of this method is linear regression, which is also known as simple regression or ordinary least squares (OLS). Based on a line of best fit, linear regression determines the linear relationship between two variables.

The slope of a straight line used to represent linear regression thus indicates how changing one variable effect changing another. In a linear regression connection, the value of one variable when the value of the other is zero is represented by the y-intercept. There are also non-linear regression models, although they are far more complicated.

## Terminologies used in regression analysis

Outliers

The term “outlier” refers to an observation in a dataset that has an extremely high or very low value in comparison to the other observations, i.e., it does not belong to the population.

Multicollinearity

The independent variables are said to be multicollinear when there is a strong correlation between them.

Heteroscedasticity

Heteroscedasticity refers to the non-constant fluctuation between the target variable and the independent variable.

Both under- and over-fit

Overfitting may result from the usage of extraneous explanatory variables. Overfitting occurs when our algorithm performs admirably on the training set but falls short on the test sets.

## Linear regression

In simple terms, linear regression is used to find a relationship between two variables: a Dependent variable (y) and an independent variable (X) with the help of a straight line. It also makes predictions for continuous or numeric variables such as sales, salary, age, and product price and shows us how the value of the dependent variable changes with the change in the value of an independent variable.

Watch more videos on machine learning at Data Science Dojo

Let’s say we have a dataset available consisting of house areas in square meters and their respective prices.

As the change in area results in a change in price change of a house, we will put the area on the X-axis as an independent variable and the Price on the Y-axis as a dependent variable.

On the 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.

Now using this data, we are required to predict the price of houses having the following areas:

500, 2000, and 3500.

After plotting these points, if a linear pattern is visible, sketch a straight line as the line of best fit.

The best fit line we draw minimizes the distance between it and the observed data. Estimating this line is a key component of regression analysis that helps to infer the relationships between a dependent variable and an independent variable.

## Measures for linear regression

To understand the amount of error that exists between different models in linear regression, we use metrics. Let’s discuss some of the evaluation measures for regression:

• ### Mean Absolute Error

Mean absolute error measures the absolute difference between the predicted and actual values of the model. This metric is the average prediction error. Lower MAE values indicate a better fit.

• ### Root Mean Squared Error

Root Mean Squared Error indicates how different the residuals are from zero. Residuals represent the difference between the observed and predicted value of the dependent variable.

• ### R-Squared Measure

R squared Measure is the standard deviation of the residuals. The plot of the residuals shows the distance of the data points from the regression line. The root mean squared error squares the residuals, average the residuals, and takes the square root. RMSE measures the difference between the actual target from the predicted values.

Lower RMSE values indicate shorter distances from the actual data point to the line and therefore a better fit. RMSE uses the same units as the dependent value.

## Logistic regression

Additionally, logistic models can modify raw data streams to produce characteristics for various AI and machine learning methods. In reality, one of the often employed machine learning techniques for binary classification issues, or problems with two class values, includes logistic regression. These problems include predictions like “this or that,” “yes or no,” and “A or B.”

The probability of occurrences can also be estimated using logistic regression, which includes establishing a link between feature likelihood and outcome likelihood. In other words, it can be applied to categorization by building a model that links the number of hours of study to the likelihood that a student would pass or fail.

## Comparison of linear regression and logistic regression

The primary distinction between logistic and linear regression is that the output of logistic regression is constant whereas the output of linear regression is continuousutilized.

The outcome, or dependent variable, in logistic regression has just two possible values. However, the output of a linear regression is continuous, which means that there are an endless number of possible values for it.

When the response variable is categorical, such as yes/no, true/false, and pass/fail, logistic regression is utilised. When the response variable is continuous, like hours, height, or weight, linear regression is utilised.

Logistic regression and linear regression, for instance, can predict various outcomes depending on the information about the amount of time a student spent studying and the results of their exams.

### Curve, a visual representation of linear and logistic regression

A straight line, often known as a regression line, is used to indicate linear regression. This line displays the expected score on “y” for each value of “x.” Additionally, the distance between the data points on the plot and the regression line reveals model flaws.

In contrast, an S-shaped curve is revealed using logistic regression. Here, the orientation and steepness of the curve are affected by changes in the regression coefficients. So, it follows that a positive slope yields an S-shaped curve, but a negative slope yields a Z-shaped curve.

## Which one to use – Linear regression or logistic regression?

Regression analysis requires careful attention to the problem statement, which must be understood before proceeding. It seems sense to apply linear regression if the problem description mentions forecasts. If binary classification is included in the issue statement, logistic regression should be used. Similarly, we must assess each of our regression models in light of the problem statement.

December 20, 2022
##### Logistic regression in R: A classification technique to predict credit card default

Learn how logistic regression fits a dataset to make predictions in R, as well as when and why to use it.

Logistic regression is one of the statistical techniques in machine learning used to form prediction models. It is one of the most popular classification algorithms mostly used for binary classification problems (problems with two class values, however, some variants may deal with multiple classes as well). It’s used for various research and industrial problems.

Therefore, it is essential to have a good grasp of logistic regression algorithms while learning data science. This tutorial is a sneak peek from many of Data Science Dojo’s hands-on exercises from their data science Bootcamp program, you will learn how logistic regression fits a dataset to make predictions, as well as when and why to use it.

In short, Logistic Regression is used when the dependent variable(target) is categorical. For example:

• To predict whether an email is spam (1) or not spam (0)
• Whether the tumor is malignant (1) or not (0)

Intro to logistic regression

It is named ‘Logistic Regression’ because its underlying technology is quite the same as Linear Regression. There are structural differences in how linear and logistic regression operate. Therefore, linear regression isn’t suitable to be used for classification problems. This link answers in detail why linear regression isn’t the right approach for classification.

Its name is derived from one of the core functions behind its implementation called the logistic function or the sigmoid function. It’s an S-shaped curve that can take any real-valued number and map it into a value between 0 and 1, but never exactly at those limits.

The hypothesis function of logistic regression can be seen below where the function g(z) is also shown.

The hypothesis for logistic regression now becomes:

Here θ (theta) is a vector of parameters that our model will calculate to fit our classifier.

After calculations from the above equations, the cost function is now as follows:

Here m is several training examples. Like Linear Regression, we will use gradient descent to minimize our cost function and calculate the vector θ (theta).

This tutorial will follow the format below to provide you with hands-on practice with Logistic Regression:

1. Importing Libraries
2. Importing Datasets
3. Exploratory Data Analysis
4. Feature Engineering
5. Pre-processing
6. Model Development
7. Prediction
8. Evaluation

### The scenario

In this tutorial, we will be working with the Default of Credit Card Clients Data Set. This data set has 30000 rows and 24 columns. The data set could be used to estimate the probability of default payment by credit card clients using the data provided. These attributes are related to various details about a customer, his past payment information, and bill statements. It is hosted in Data Science Dojo’s repository.

Think of yourself as a lead data scientist employed at a large bank. You have been assigned to predict whether a particular customer will default on their payment next month or not. The result is an extremely valuable piece of information for the bank to take decisions regarding offering credit to its customers and could massively affect the bank’s revenue. Therefore, your task is very critical. You will learn to use logistic regression to solve this problem.

The dataset is a tricky one as it has a mix of categorical and continuous variables. Moreover, you will also get a chance to practice these concepts through short assignments given at the end of a few sub-modules. Feel free to change the parameters in the given methods once you have been through the entire notebook.

### 1) Importing libraries

We’ll begin by importing the dependencies that we require. The following dependencies are popularly used for data wrangling operations and visualizations. We would encourage you to have a look at their documentation.

``````library(knitr)
library(tidyverse)
library(ggplot2)
library(mice)
library(lattice)
library(reshape2)
#install.packages("DataExplorer") if the following package is not available
library(DataExplorer)``````

### 2) Importing Datasets

The dataset is available at Data Science Dojo’s repository in the following link. We’ll use the head method to view the first few rows.

``````## Need to fetch the excel file
path <- "https://code.datasciencedojo.com/datasciencedojo/datasets/raw/master/
Default%20of%20Credit%20Card%20Clients/default%20of%20credit%20card%20clients.csv"
``````

Since the header names are in the first row of the dataset, we’ll use the code below to first assign the headers to be the one from the first row and then delete the first row from the dataset. This way we will get our desired form.

``````colnames(data) <- as.character(unlist(data[1,]))
data = data[-1, ]

To avoid any complications ahead, we’ll rename our target variable “default payment next month” to a name without spaces using the code below.

``````colnames(data)[colnames(data)=="default payment next month"] <- "default_payment"

### 3) Exploratory data analysis

Data Exploration is one of the most significant portions of the machine-learning process. Clean data can ensure a notable increase in the accuracy of our model. No matter how powerful our model is, it cannot function well unless the data we provide has been thoroughly processed.

This step will briefly take you through this step and assist you to visualize your data, find the relation between variables, deal with missing values and outliers and assist in getting some fundamental understanding of each variable we’ll use. Moreover, this step will also enable us to figure out the most important attributes to feed our model and discard those that have no relevance.

We will start by using the dim function to print out the dimensionality of our data frame.

``dim(data)``

30000 25

The str method will allow us to know the data type of each variable. We’ll transform it to a numeric data type since it’ll be handier to use for our functions ahead.

``str(data)``
```'data.frame':	30000 obs. of  25 variables:
\$ ID             : Factor w/ 30001 levels "1","10","100",..: 1 11112 22223 23335 24446 25557 26668 27779 28890 2 ...
\$ LIMIT_BAL      : Factor w/ 82 levels "10000","100000",..: 14 5 81 48 48 48 49 2 7 14 ...
\$ SEX            : Factor w/ 3 levels "1","2","SEX": 2 2 2 2 1 1 1 2 2 1 ...
\$ EDUCATION      : Factor w/ 8 levels "0","1","2","3",..: 3 3 3 3 3 2 2 3 4 4 ...
\$ MARRIAGE       : Factor w/ 5 levels "0","1","2","3",..: 2 3 3 2 2 3 3 3 2 3 ...
\$ AGE            : Factor w/ 57 levels "21","22","23",..: 4 6 14 17 37 17 9 3 8 15 ...
\$ PAY_0          : Factor w/ 12 levels "-1","-2","0",..: 5 1 3 3 1 3 3 3 3 2 ...
\$ PAY_2          : Factor w/ 12 levels "-1","-2","0",..: 5 5 3 3 3 3 3 1 3 2 ...
\$ PAY_3          : Factor w/ 12 levels "-1","-2","0",..: 1 3 3 3 1 3 3 1 5 2 ...
\$ PAY_4          : Factor w/ 12 levels "-1","-2","0",..: 1 3 3 3 3 3 3 3 3 2 ...
\$ PAY_5          : Factor w/ 11 levels "-1","-2","0",..: 2 3 3 3 3 3 3 3 3 1 ...
\$ PAY_6          : Factor w/ 11 levels "-1","-2","0",..: 2 4 3 3 3 3 3 1 3 1 ...
\$ BILL_AMT1      : Factor w/ 22724 levels "-1","-10","-100",..: 13345 10030 10924 15026 21268 18423 12835 1993 1518 307 ...
\$ BILL_AMT2      : Factor w/ 22347 levels "-1","-10","-100",..: 11404 5552 3482 15171 16961 17010 13627 12949 3530 348 ...
\$ BILL_AMT3      : Factor w/ 22027 levels "-1","-10","-100",..: 18440 9759 3105 15397 12421 16866 14184 17258 2072 365 ...
\$ BILL_AMT4      : Factor w/ 21549 levels "-1","-10","-100",..: 378 11833 3620 10318 7717 6809 16081 8147 2129 378 ...
\$ BILL_AMT5      : Factor w/ 21011 levels "-1","-10","-100",..: 385 11971 3950 10407 6477 6841 14580 76 1796 2638 ...
\$ BILL_AMT6      : Factor w/ 20605 levels "-1","-10","-100",..: 415 11339 4234 10458 6345 7002 14057 15748 12215 3230 ...
\$ PAY_AMT1       : Factor w/ 7944 levels "0","1","10","100",..: 1 1 1495 2416 2416 3160 5871 4578 4128 1 ...
\$ PAY_AMT2       : Factor w/ 7900 levels "0","1","10","100",..: 6671 5 1477 2536 4508 2142 4778 6189 1 1 ...
\$ PAY_AMT3       : Factor w/ 7519 levels "0","1","10","100",..: 1 5 5 646 6 6163 4292 1 4731 1 ...
\$ PAY_AMT4       : Factor w/ 6938 levels "0","1","10","100",..: 1 5 5 337 6620 5 2077 5286 5 813 ...
\$ PAY_AMT5       : Factor w/ 6898 levels "0","1","10","100",..: 1 1 5 263 5777 5 950 1502 5 408 ...
\$ PAY_AMT6       : Factor w/ 6940 levels "0","1","10","100",..: 1 2003 4751 5 5796 6293 963 1267 5 1 ...
\$ default_payment: Factor w/ 3 levels "0","1","default payment next month": 2 2 1 1 1 1 1 1 1 1 ...```
``data[, 1:25] <- sapply(data[, 1:25], as.character)``

We have involved an intermediate step by converting our data to character first. We need to use as.character before as.numeric. This is because factors are stored internally as integers with a table to give the factor level labels. Just using as.numeric will only give the internal integer codes.

``````data[, 1:25] <- sapply(data[, 1:25], as.numeric)
str(data)``````
```'data.frame':	30000 obs. of  25 variables:
\$ ID             : num  1 2 3 4 5 6 7 8 9 10 ...
\$ LIMIT_BAL      : num  20000 120000 90000 50000 50000 50000 500000 100000 140000 20000 ...
\$ SEX            : num  2 2 2 2 1 1 1 2 2 1 ...
\$ EDUCATION      : num  2 2 2 2 2 1 1 2 3 3 ...
\$ MARRIAGE       : num  1 2 2 1 1 2 2 2 1 2 ...
\$ AGE            : num  24 26 34 37 57 37 29 23 28 35 ...
\$ PAY_0          : num  2 -1 0 0 -1 0 0 0 0 -2 ...
\$ PAY_2          : num  2 2 0 0 0 0 0 -1 0 -2 ...
\$ PAY_3          : num  -1 0 0 0 -1 0 0 -1 2 -2 ...
\$ PAY_4          : num  -1 0 0 0 0 0 0 0 0 -2 ...
\$ PAY_5          : num  -2 0 0 0 0 0 0 0 0 -1 ...
\$ PAY_6          : num  -2 2 0 0 0 0 0 -1 0 -1 ...
\$ BILL_AMT1      : num  3913 2682 29239 46990 8617 ...
\$ BILL_AMT2      : num  3102 1725 14027 48233 5670 ...
\$ BILL_AMT3      : num  689 2682 13559 49291 35835 ...
\$ BILL_AMT4      : num  0 3272 14331 28314 20940 ...
\$ BILL_AMT5      : num  0 3455 14948 28959 19146 ..
\$ BILL_AMT6      : num  0 3261 15549 29547 19131 ...
\$ PAY_AMT1       : num  0 0 1518 2000 2000 ...
\$ PAY_AMT2       : num  689 1000 1500 2019 36681 ...
\$ PAY_AMT3       : num  0 1000 1000 1200 10000 657 38000 0 432 0 ...
\$ PAY_AMT4       : num  0 1000 1000 1100 9000 ...
\$ PAY_AMT5       : num  0 0 1000 1069 689 ...
\$ PAY_AMT6       : num  0 2000 5000 1000 679 ...
\$ default_payment: num  1 1 0 0 0 0 0 0 0 0 ...```

When applied to a data frame, the summary() function is essentially applied to each column, and the results for all columns are shown together. For a continuous (numeric) variable like “age”, it returns the 5-number summary showing 5 descriptive statistic as these are numeric values.

``````summary(data)
``````
```       ID          LIMIT_BAL            SEX          EDUCATION
Min.   :    1   Min.   :  10000   Min.   :1.000   Min.   :0.000
1st Qu.: 7501   1st Qu.:  50000   1st Qu.:1.000   1st Qu.:1.000
Median :15000   Median : 140000   Median :2.000   Median :2.000
Mean   :15000   Mean   : 167484   Mean   :1.604   Mean   :1.853
3rd Qu.:22500   3rd Qu.: 240000   3rd Qu.:2.000   3rd Qu.:2.000
Max.   :30000   Max.   :1000000   Max.   :2.000   Max.   :6.000
MARRIAGE          AGE            PAY_0             PAY_2
Min.   :0.000   Min.   :21.00   Min.   :-2.0000   Min.   :-2.0000
1st Qu.:1.000   1st Qu.:28.00   1st Qu.:-1.0000   1st Qu.:-1.0000
Median :2.000   Median :34.00   Median : 0.0000   Median : 0.0000
Mean   :1.552   Mean   :35.49   Mean   :-0.0167   Mean   :-0.1338
3rd Qu.:2.000   3rd Qu.:41.00   3rd Qu.: 0.0000   3rd Qu.: 0.0000
Max.   :3.000   Max.   :79.00   Max.   : 8.0000   Max.   : 8.0000
PAY_3             PAY_4             PAY_5             PAY_6
Min.   :-2.0000   Min.   :-2.0000   Min.   :-2.0000   Min.   :-2.0000
1st Qu.:-1.0000   1st Qu.:-1.0000   1st Qu.:-1.0000   1st Qu.:-1.0000
Median : 0.0000   Median : 0.0000   Median : 0.0000   Median : 0.0000
Mean   :-0.1662   Mean   :-0.2207   Mean   :-0.2662   Mean   :-0.2911
3rd Qu.: 0.0000   3rd Qu.: 0.0000   3rd Qu.: 0.0000   3rd Qu.: 0.0000
Max.   : 8.0000   Max.   : 8.0000   Max.   : 8.0000   Max.   : 8.0000
BILL_AMT1         BILL_AMT2        BILL_AMT3         BILL_AMT4
Min.   :-165580   Min.   :-69777   Min.   :-157264   Min.   :-170000
1st Qu.:   3559   1st Qu.:  2985   1st Qu.:   2666   1st Qu.:   2327
Median :  22382   Median : 21200   Median :  20089   Median :  19052
Mean   :  51223   Mean   : 49179   Mean   :  47013   Mean   :  43263
3rd Qu.:  67091   3rd Qu.: 64006   3rd Qu.:  60165   3rd Qu.:  54506
Max.   : 964511   Max.   :983931   Max.   :1664089   Max.   : 891586
BILL_AMT5        BILL_AMT6          PAY_AMT1         PAY_AMT2
Min.   :-81334   Min.   :-339603   Min.   :     0   Min.   :      0
1st Qu.:  1763   1st Qu.:   1256   1st Qu.:  1000   1st Qu.:    833
Median : 18105   Median :  17071   Median :  2100   Median :   2009
Mean   : 40311   Mean   :  38872   Mean   :  5664   Mean   :   5921
3rd Qu.: 50191   3rd Qu.:  49198   3rd Qu.:  5006   3rd Qu.:   5000
Max.   :927171   Max.   : 961664   Max.   :873552   Max.   :1684259
PAY_AMT3         PAY_AMT4         PAY_AMT5           PAY_AMT6
Min.   :     0   Min.   :     0   Min.   :     0.0   Min.   :     0.0
1st Qu.:   390   1st Qu.:   296   1st Qu.:   252.5   1st Qu.:   117.8
Median :  1800   Median :  1500   Median :  1500.0   Median :  1500.0
Mean   :  5226   Mean   :  4826   Mean   :  4799.4   Mean   :  5215.5
3rd Qu.:  4505   3rd Qu.:  4013   3rd Qu.:  4031.5   3rd Qu.:  4000.0
Max.   :896040   Max.   :621000   Max.   :426529.0   Max.   :528666.0
default_payment
Min.   :0.0000
1st Qu.:0.0000
Median :0.0000
Mean   :0.2212
3rd Qu.:0.0000
Max.   :1.0000```

Using the introduced method, we can get to know the basic information about the dataframe, including the number of missing values in each variable.

``introduce(data)``

As we can observe, there are no missing values in the dataframe.

The information in summary above gives a sense of the continuous and categorical features in our dataset. However, evaluating these details against the data description shows that categorical values such as EDUCATION and MARRIAGE have categories beyond those given in the data dictionary. We’ll find out these extra categories using the value_counts method.

``````count(data, vars = EDUCATION)
``````
vars n
0 14
1 10585
2 14030
3 4917
4 123
5 280
6 51

The data dictionary defines the following categories for EDUCATION: “Education (1 = graduate school; 2 = university; 3 = high school; 4 = others)”. However, we can also observe 0 along with numbers greater than 4, i.e. 5 and 6. Since we don’t have any further details about it, we can assume 0 to be someone with no educational experience and 0 along with 5 & 6 can be placed in others along with 4.

``````count(data, vars = MARRIAGE)
``````
vars n
0 54
1 13659
2 15964
3 323

The data dictionary defines the following categories for MARRIAGE: “Marital status (1 = married; 2 = single; 3 = others)”. Since category 0 hasn’t been defined anywhere in the data dictionary, we can include it in the ‘others’ category marked as 3.

``````#replace 0's with NAN, replace others too
data\$EDUCATION[data\$EDUCATION == 0] <- 4
data\$EDUCATION[data\$EDUCATION == 5] <- 4
data\$EDUCATION[data\$EDUCATION == 6] <- 4
data\$MARRIAGE[data\$MARRIAGE == 0] <- 3``````
``````count(data, vars = MARRIAGE)
count(data, vars = EDUCATION)
``````
vars n
1 13659
2 15964
3 377
vars n
1 10585
2 14030
3 4917
4 468

We’ll now move on to a multi-variate analysis of our variables and draw a correlation heat map from the DataExplorer library. The heatmap will enable us to find out the correlation between each variable. We are more interested in finding out the correlation between our predictor attributes with the target attribute default payment next month. The color scheme depicts the strength of correlation between 2 variables.

This will be a simple way to quickly find out how much an impact a variable has on our final outcome. There are other ways as well to figure this out.

``````plot_correlation(na.omit(data), maxcat = 5L)
``````

We can observe the week correlation of AGE, BILL_AMT1, BILL_AMT2, BILL_AMT3, BILL_AMT4, BILL_AMT5, BILL_AMT6 with our target variable.

Now let’s have a univariate analysis of our variables. We’ll start with the categorical variables and have a quick check on the frequency of distribution of categories. The code below will allow us to observe the required graphs. We’ll first draw distribution for all PAY variables.

``````plot_histogram(data)
``````

We can make a few observations from the above histogram. The distribution above shows that all nearly all PAY attributes are rightly skewed.

### 4) Feature engineering

This step can be more important than the actual model used because a machine learning algorithm only learns from the data we give it, and creating features that are relevant to a task is absolutely crucial.

Analyzing our data above, we’ve been able to note the extremely week correlation of some variables with the final target variable. The following are the ones which have significantly low correlation values: AGE, BILL_AMT2, BILL_AMT3, BILL_AMT4, BILL_AMT5, BILL_AMT6.

``````#deleting columns

data_new <- select(data, -one_of('ID','AGE', 'BILL_AMT2',
'BILL_AMT3','BILL_AMT4','BILL_AMT5','BILL_AMT6'))
``````

### 5) Pre-processing

Standardization is a transformation that centers the data by removing the mean value of each feature and then scale it by dividing (non-constant) features by their standard deviation. After standardizing data the mean will be zero and the standard deviation one.

It is most suitable for techniques that assume a Gaussian distribution in the input variables and work better with rescaled data, such as linear regression, logistic regression and linear discriminate analysis. If a feature has a variance that is orders of magnitude larger than others, it might dominate the objective function and make the estimator unable to learn from other features correctly as expected.

In the code below, we’ll use the scale method transform our dataset using it.

``````data_new[, 1:17] <- scale(data_new[, 1:17])
``````
``````head(data_new)
``````

The next task we’ll do is to split the data for training and testing as we’ll use our test data to evaluate our model. We will now split our dataset into train and test. We’ll change it to 0.3. Therefore, 30% of the dataset is reserved for testing while the remaining for training. By default, the dataset will also be shuffled before splitting.

``````#create a list of random number ranging from 1 to number of rows from actual data
#and 70% of the data into training data

data2 = sort(sample(nrow(data_new), nrow(data_new)*.7))

#creating training data set by selecting the output row values
train <- data_new[data2,]

#creating test data set by not selecting the output row values
test <- data_new[-data2,]
``````

Let us print the dimensions of all these variables using the dim method. You can notice the 70-30% split.

``````dim(train)
dim(test)
``````

21000 18

9000 18

### 6) Model development

We will now move on to our most important step of developing our logistic regression model. We have already fetched our machine learning model in the beginning. Now with a few lines of code, we’ll first create a logistic regression model which as has been imported from sci-kit learn’s linear model package to our variable named model.

Followed by this, we’ll train our model using the fit method with X_train and y_train which contain 70% of our dataset. This will be a binary classification model.

``````## fit a logistic regression model with the training dataset
log.model <- glm(default_payment ~., data = train, family = binomial(link = "logit"))
``````
``````summary(log.model)
``````
```Call:
glm(formula = default_payment ~ ., family = binomial(link = "logit"),
data = train)

Deviance Residuals:
Min       1Q   Median       3Q      Max
-3.1171  -0.6998  -0.5473  -0.2946   3.4915

Coefficients:
Estimate Std. Error z value Pr(>|z|)
(Intercept) -1.465097   0.019825 -73.900  < 2e-16 ***
LIMIT_BAL   -0.083475   0.023905  -3.492 0.000480 ***
SEX         -0.082986   0.017717  -4.684 2.81e-06 ***
EDUCATION   -0.059851   0.019178  -3.121 0.001803 **
MARRIAGE    -0.107322   0.018350  -5.849 4.95e-09 ***
PAY_0        0.661918   0.023605  28.041  < 2e-16 ***
PAY_2        0.069704   0.028842   2.417 0.015660 *
PAY_3        0.090691   0.031982   2.836 0.004573 **
PAY_4        0.074336   0.034612   2.148 0.031738 *
PAY_5        0.018469   0.036430   0.507 0.612178
PAY_6        0.006314   0.030235   0.209 0.834584
BILL_AMT1   -0.123582   0.023558  -5.246 1.56e-07 ***
PAY_AMT1    -0.136745   0.037549  -3.642 0.000271 ***
PAY_AMT2    -0.246634   0.056432  -4.370 1.24e-05 ***
PAY_AMT3    -0.014662   0.028012  -0.523 0.600677
PAY_AMT4    -0.087782   0.031484  -2.788 0.005300 **
PAY_AMT5    -0.084533   0.030917  -2.734 0.006254 **
PAY_AMT6    -0.027355   0.025707  -1.064 0.287277
---
Signif. codes:  0 '***' 0.001 '**' 0.01 '*' 0.05 '.' 0.1 ' ' 1

(Dispersion parameter for binomial family taken to be 1)

Null deviance: 22176  on 20999  degrees of freedom
Residual deviance: 19535  on 20982  degrees of freedom
AIC: 19571

Number of Fisher Scoring iterations: 6```

### 7) Prediction

Below we’ll use the prediction method to find out the predictions made by our Logistic Regression method. We will first store the predicted results in our y_pred variable and print our first 10 rows of our test data set. Following this we will print the predicted values of the corresponding rows and the original labels that were stored in y_test for comparison.

``````test[1:10,]
``````

``````## to predict using logistic regression model, probablilities obtained
log.predictions <- predict(log.model, test, type="response")

## Look at probability output
``````
2
0.539623162720197
7
0.232835137994762
10
0.25988780274953
11
0.0556716133560243
15
0.422481223473459
22
0.165384552048511
25
0.0494775267027534
26
0.238225423596718
31
0.248366972046479
37
0.111907725985513

Below we are going to assign our labels with decision rule that if the prediction is greater than 0.5, assign it 1 else 0.

``````log.prediction.rd <- ifelse(log.predictions > 0.5, 1, 0)
``````
2
1
7
0
10
0
11
0
15
0
22
0
25
0
26
0
31
0
37
0

### Evaluation

We’ll now discuss a few evaluation metrics to measure the performance of our machine learning model here. This part has significant relevance since it will allow us to understand the most important characteristics that led to our model development.

We will output the confusion matrix. It is a handy presentation of the accuracy of a model with two or more classes.

The table presents predictions on the x-axis and accuracy outcomes on the y-axis. The cells of the table are the number of predictions made by a machine learning algorithm.

According to an article the entries in the confusion matrix have the following meaning in the context of our study:

[[a b][c d]]

• a is the number of correct predictions that an instance is negative,
• b is the number of incorrect predictions that an instance is positive,
• c is the number of incorrect of predictions that an instance is negative, and
• d is the number of correct predictions that an instance is positive.
``````table(log.prediction.rd, test[,18])
``````
```
log.prediction.rd    0    1
0 6832 1517
1  170  481```

We’ll write a simple function to print the accuracy below

``````accuracy <- table(log.prediction.rd, test[,18])
sum(diag(accuracy))/sum(accuracy)
``````

0.812555555555556

### Conclusion

This tutorial has given you a brief and concise overview of the Logistic Regression algorithm and all the steps involved in achieving better results from our model. This notebook has also highlighted a few methods related to Exploratory Data Analysis, Pre-processing, and Evaluation, however, there are several other methods that we would encourage to explore on our blog or video tutorials.

If you want to take a deeper dive into several data science techniques. Join our 5-day hands-on Data Science Bootcamp preferred by working professionals, we cover the following topics:

• Fundamentals of Data Mining
• Machine Learning Fundamentals
• Introduction to R
• Introduction to Azure Machine Learning Studio
• Data Exploration, Visualization, and Feature Engineering
• Decision Tree Learning
• Ensemble Methods: Bagging, Boosting, and Random Forest
• Regression: Cost Functions, Gradient Descent, Regularization
• Unsupervised Learning
• Recommendation Systems
• Metrics and Methods for Evaluating Predictive Models
• Introduction to Online Experimentation and A/B Testing
• Fundamentals of Big Data Engineering
• Message Queues and Real-time Analytics
• NoSQL Databases and HBase
• Hack Project: Creating a Real-time IoT Pipeline
• Naive Bayes
• Logistic Regression
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This post was originally sponsored on What’s The Big Data.

August 18, 2022

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