Question: The scatter chart in the following figure was created using sample data for profits and market capitalizations from a sample of firms in the Fortune 500.
a. What does this scatter chart indicate about the relationship between profits and market capitalization? Discuss.
b. The data used to produce this are contained in the file Fortune500. Calculate the covariance between profits and market capitalization. What does the covariance indicate about the relationship between profits and market capitalization? Discuss.
c. Calculate the correlation coefficient between profits and market capitalization. What does the correlations coefficient indicate about the relationship between profits and market capitalization?