Monday, May 31, 2010

gC2

I had forgotten that I did that that Stock Comparison a couple of years ago.
However, now that I look at it again, I see that gSC is NOT what I want.

gSC multiplies stock returns together.
If their product is positive, the returns have the same sign
... and the two stocks move up or down together.

gSC then adds all those products and fiddles scales the resulting number so it lies between -1 and +1.

That means that LARGE returns have a greater product (hence a greater weight) than small returns.
Is that what I want?
NO!

What I want is to be able to say things like:
"Over the past 5 years, the weekly prices of Chevron (CVX) and Exxon-Mobil (XOM) have moved together -- 79% of the time."

Now that calculation don't require no fancy fiddling scaling.
We jest sorta count the number of times the returns have the same sign, eh?
It's like -- a poor man's correlation.

Then we get things like this:



Am I happy?


P.S. Did I mention that gC2 stands for Comparison #2.
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If'n y'all want to play this game, here's the spreadsheet:
http://www.gummy-stuff.org/Excel/gC2.xls

I might also mention that, being old lazy efficient, I generate new spreadsheets by modifying old spreadsheets.
Every time I do this, the size of the spreadsheet grows ... and grows.
This one is obscene, at (almost) 6 MB!
That used to bother me.
It don't, no more.

Once upon a time, somebuddy went through all my spreadsheets and created new ones -- reducing the size of each significantly.

That was when there were a couple of dozen.
Now there are over 500 of 'em !!

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One thing that's interesting is persistence.
Suppose you discover some neat relationship between a pair of stocks over the last 5 years.
Will that relationship persist over the next year?
Here are charts for 5-years and the subsequent year:


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You decide.

 

4 comments:

  1. Dear Professor,
    I write from Italy and I read every day your posts. The problem of the size of the spreadsheet that grows, is due to the old versions of Excel...
    You saved this file for Excel 97-2003 and 5-95, but if you save it as Microsoft Office Excel, the size decreases to 3 MB.

    Bye Roberto

    ReplyDelete
  2. Hey Roberto!
    Molti grazie!

    That spreadsheet is now about 3 MB.
    See? I said I was getting senile, eh?

    P.S.
    Have you seen our Praiano diary?
    http://www.gummy-stuff.org/Praiano-diary.htm

    One-of-these-days we'll rent another villa
    ... maybe Positano :^)

    ReplyDelete
  3. Yes, but pay attention to the undersea volcano Marsili in the Tyrrhenian Sea.
    Marsili is active and recent research has indicated signs of restlessness, although the risks of any dangerous eruptive activity are very slight.

    ReplyDelete
  4. Mamma mia!

    http://volcanism.wordpress.com/2010/03/30/marsili-seamount-tsunami-threat-for-southern-italy/

    Thanks for the warning.

    ReplyDelete