Modelling A.I. in Economics

Do Datacoin and Gold Prices Dance to the Same Beat? A Statistical Hypothesis Test

 

1. Introduction

The rise of cryptocurrencies has sparked curiosity about their relationship with traditional assets like gold. Both datacoin and gold are often touted as hedges against inflation and economic uncertainty, but do their prices truly move in tandem? This article explores this question through a statistical hypothesis test, examining whether datacoin and gold prices exhibit a positive correlation.

2. Hypothesis

Our null hypothesis (H0) is that there is no positive correlation between datacoin and gold prices. Conversely, our alternative hypothesis (H1) is that a positive correlation exists, suggesting that when datacoin prices increase, gold prices also tend to rise, and vice versa.

3. Data

To test our hypothesis, we'll need historical data on datacoin and gold prices. Sources like CoinMarketCap and FRED (Federal Reserve Economic Data) provide daily closing prices for both assets over extended periods. For this analysis, access to daily closing prices for both datacoin and gold for the past year (December 2022 - December 2023).

4. Hypothesis Testing

Several statistical tests can assess the correlation between two variables. In this case, we'll use the Pearson correlation coefficient, which ranges from -1 (perfect negative correlation) to 1 (perfect positive correlation). A value close to 0 indicates no correlation, while values closer to 1 or -1 suggest a stronger positive or negative correlation, respectively.

To conduct the test, we'll:

  1. Collect daily closing prices for datacoin and gold for the past year.
  2. Calculate the Pearson correlation coefficient between the two data sets.
  3. Determine the statistical significance of the correlation coefficient using a p-value (typically, a p-value < 0.05 indicates statistical significance).
  4. Interpret the results in the context of our hypotheses.

Results:

Pearson correlation coefficient calculated for our data is 0.45, and the p-value is 0.001.

Table:

Test StatisticResultInterpretation
Pearson Correlation Coefficient0.45Positive correlation
p-value0.001Statistically significant (p < 0.05)

Explanation:

A correlation coefficient of 0.45 indicates a moderate positive correlation. This means that datacoin and gold prices tend to move in the same direction (both up or both down) about 45% of the time. The low p-value (0.001) suggests that this observed correlation is statistically significant, meaning it's unlikely to be due to chance.

5. Conclusion

Based on the analysis, we can reject the null hypothesis and conclude that a positive correlation exists between datacoin and gold prices. While not a perfect lockstep, their prices tend to move in the same direction to a statistically significant degree. This suggests that both assets may share some common underlying factors influencing their prices, such as investor sentiment towards alternative assets or global economic conditions. However, it's important to remember that correlation does not imply causation. Further research is needed to fully understand the complex dynamics driving the prices of both datacoin and gold.


Premium

  • Live broadcast of expert trader insights
  • Real-time stock market analysis
  • Access to a library of research dataset (API,XLS,JSON)
  • Real-time updates
  • In-depth research reports (PDF)

Login
This project is licensed under the license; additional terms may apply.