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#1
11-29-2007, 09:38 PM
 chisness Senior Member Join Date: Apr 2005 Posts: 1,831
Basic correlations

I'm looking into doing some basic models for a school project looking at how some factor correlates with a price effect on something else.

Very basic example: change in oil price results in change in airline stock

I'm looking to get some more examples like that one - anything where data is easily accessible online.
#2
11-29-2007, 09:40 PM
 hawk59 Senior Member Join Date: Mar 2004 Posts: 2,207
Re: Basic correlations

easiest examples would be commodity companies compared to the commodity, i.e. price of gold vs. stocks of gold mining companies
#3
11-29-2007, 10:15 PM
 PRE Senior Member Join Date: May 2007 Location: Council Bluffs Posts: 571
Re: Basic correlations

I'm not really sure what is is you're trying to do, but in terms of airlines, don't forget that these guy hedge a portion of it.
#4
11-29-2007, 10:41 PM
 chisness Senior Member Join Date: Apr 2005 Posts: 1,831
Re: Basic correlations

I'm looking for 5-10 correlations to examine, another example would be interest rates changing then seeing what happens to bond prices
#5
11-29-2007, 10:47 PM
 PRE Senior Member Join Date: May 2007 Location: Council Bluffs Posts: 571
Re: Basic correlations

You can't think of 5 basic correlations? This should be easy...

Find the correlation betweens stock price returns and political parties being in office.

Find the 3-year return of stocks when valuations (per normalized P/E ratios) are above and below the mean.

Find the return of stocks during the last three days of the month over the past ten years to see if the emergence of hedge funds have had a signficiant effect on trading (returns would be higher towards the end of the month to prevent bad consecutive months from ocurring).

Find the correlation between stock returns when the earnings yield of the S&amp;P 500 (E/P) is lower than the yield on the 10-year bond. First look at this data over the past ten years, then look at it over the past 50 years. You'll be able to prove why anyone who believes in the Fed model is foolish.
#6
11-29-2007, 10:51 PM
 mak15 Senior Member Join Date: Jan 2006 Location: u penn Posts: 2,093
Re: Basic correlations

[ QUOTE ]
I'm looking for 5-10 correlations to examine, another example would be interest rates changing then seeing what happens to bond prices

[/ QUOTE ]

ya i would imagine this is a pretty strong correlation.
#7
11-29-2007, 10:51 PM
 econophile Senior Member Join Date: Jul 2005 Location: (X\'X)^(-1)X\'Y Posts: 5,085
Re: Basic correlations

[ QUOTE ]
I'm not really sure what is is you're trying to do, but in terms of airlines, don't forget that these guy hedge a portion of it.

[/ QUOTE ]

#8
11-29-2007, 10:56 PM
 PRE Senior Member Join Date: May 2007 Location: Council Bluffs Posts: 571
Re: Basic correlations

[ QUOTE ]
[ QUOTE ]
I'm not really sure what is is you're trying to do, but in terms of airlines, don't forget that these guy hedge a portion of it.

[/ QUOTE ]

[/ QUOTE ]

All airlines should in fact due this. You could make the argument that SW should no longer be considered cyclical and, consequenly, warrant a mu;tiple premium over its competitors.
#9
11-29-2007, 10:59 PM
 snappo Senior Member Join Date: Sep 2004 Posts: 535
Re: Basic correlations

[ QUOTE ]
Find the correlation between stock returns when the earnings yield of the S&amp;P 500 (E/P) is lower than the yield on the 10-year bond. First look at this data over the past ten years, then look at it over the past 50 years. You'll be able to prove why anyone who believes in the Fed model is foolish.

[/ QUOTE ]

How can I find this data? And could you elaborate on the fed bit?
#10
11-29-2007, 11:31 PM
 chisness Senior Member Join Date: Apr 2005 Posts: 1,831
Re: Basic correlations

[ QUOTE ]
You can't think of 5 basic correlations? This should be easy...

[/ QUOTE ]

I'm sure with some research I could find 5 good ones, but since this is going to be over a non-small time period, I want to make sure I get some unique/interesting ideas (thank you for yours)

Also, PRE:
2) can you explain this -- what "mean" are the valuations above/below?
4) correlation between which stock returns?

This article talks about how the market is like chaos and looking at just one factor is pretty pointless for the market as a whole

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