The coefficient determination i.e. r2 is determined on the basis of the ratio of the explained variation to the total variation.

Thus, coefficient of Determination, or

If the value of the coefficient of determination comes out to be one (i.e. r^{2} =1), the whole of the total variation is said to have been explained by regression, and that the unexplained variation is zero. In such a case, each X_{e} = X or Y_{e} = Y, and that all there points on the scatter diagram lie on the regression line which indicates a perfect correlation.

However, if the value of the Coefficient of Determination comes out to be zero (i.e. r^{2} = 0), the explained variation is said to be zero which indicates that there is no correlation between the variables.