2JUse the folowing data where Y is the dependent and X is the independent variable: SALARY EXPERIENCE Y ('000TL) X(Years) 126 14 58 19 75 10 130 104 14 2.a.) Find the degree of relatio nship between variables Y and X by Pearson Correlation co efficient. b.) Test the hypothesis that there is a significant correlation between Y and X at 1% level
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Correlation
It tells how the variables are linearly related with each other. It represents the direction of linear relationship between two or more variables. Its value lies between -1 to 1.
There are mainly three types of correlation
Positive correlation (0,1)
Negative correlation (-1,0)
No correlation (0)
Correlation does not mean causation. This means the correlation does not imply that a change in one variable is caused by the change in another variables keeping other factor constant.
The formula to compute the correlation coefficient using coefficient of determination is:
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