Prof. Fisher has given a method of testing the significance of the correlation coefficient in small samples. According to this method the coefficient of correlation is transformed into Z and hence the name transformation. The statistic Z given by prof. Fisher is used to test:
a.Whether an observed value of r differs significantly from some hypothetical value or.
b.Whether two samples values of r differ significantly,
For testing whether r differs significantly from zero the t- test is preferable.
In order to apply the test we have to calculate Z and by applying Fisher transformation and then calculate the value of the standard normal variate.
Z- ε / 1/√n-3