What is the euro tied to ?Posted: May 31, 2011
The value of the euro against other currency varies, depending of the economic situations, forecast, …. Sometimes this is not easy to actually get a clear sens of what is influencing the value of the european currency in respect to let’s say, the US dollars.
That’s why I was thrilled to discover last week the new tool from Google : Correlate. This new application from the internet
overlord giant allow anyone to search which web researches are correlated together. A method that has been successfully proved to work during the flu season. And, to make things even better, the user can upload its data set and look for correlations on the web.
I quickly acquired the euro-to-dollar exchange rate for the past 8 years, put it in the proper format and ask google what were the most correlated research terms. The result is quiet disappointing: no series is really correlated to the exchange rate, the most correlated (with a correlation factor of only 73%) is sao jose dos campos. In fact, most correlated series are spanish terms.
After this first look, I tried to look at correlation (or the lack of thereof) with specific research terms. Although mostly uncorrelated, the term “subprime” has an average increase correlated with a boost in the euro value. The correlation with “debt crisis” is negligible, as for other term one would expect would have an impact.
My conclusion from this exercise is that Google Correlate is not going to yield significant results by comparing the exchange rate (which is reprocessed by google) against web research. However, the potential correlation effect can be very interesting and one has to find the good combination of research term . I will continue to play with this tool in the hope of unearthing interesting or surprising (or both) effects.