The file S03_29.xlsx contains monthly prices of four precious metals: gold, silver, platinum, and palladium. The question to be explored here is whether changes in these commodities move together through time.
a. Create time series graphs of the four series. Do the series appear to move together?
b. Create four new difference variables, one for each metal. Each should list this month’s price minus the previous month’s price. Then create time series graphs of the differences. Note that there will be missing data for Jan-97 because the Dec-96 prices are not listed. Also, because the source for this data set listed prices for platinum and palladium through Nov-08 only, there will be missing data at the end of these series.
c. Create a table of correlations between the differences created in part b. Based on this table, comment on whether the changes in the prices of these metals tend to move together over time.
d. For all correlations in part c above 0.6, create the corresponding scatter plots of the differences. Do these, along with the time series graphs from parts a and b, provide a clearer picture of how these series move together over time? Discuss in some detail.
e. Check with your own formulas using Excel’s CORREL function that StatTools uses data through Dec-09 for the correlation between gold and silver, but it uses data through Nov-08 for correlations between gold and platinum. That is, check that StatTools uses all of the available data for either correlation.