Time‐dependent intrinsic correlation analysis of crude oil and the US dollar based on CEEMDAN. (24th July 2020)

• Record Type: Journal Article
• Authors: Peng, Qing; Wen, Fenghua; Gong, Xu
• Is Part Of: International journal of finance & economics. Volume 26:Number 1(2021)
• Page Start: 834
• Page End: 848
• Publication Date: 2020-07-24
• Subjects: CEEMDAN -- crude oil price -- multi‐scale correlation -- time‐dependent intrinsic correlation analysis -- US dollar index; International finance -- Periodicals; Economics -- Periodicals; 332
• DOI: 10.1002/ijfe.1823
• Languages: English
• ISSNs: 1076-9307

Abstract

Abstract: In this article, we analyze the dynamic linkage between crude oil price and the US dollar at multi‐scale frequencies using time‐dependent intrinsic correlation analysis based on the complete ensemble empirical mode decomposition with adaptive noise. After applying a refined method to extract the trend, we reveal that the overall correlation and the long‐term trend correlation exhibit very similar patterns. The correlation coefficients between crude oil and the US dollar are negative at most of the time; however, the coefficients become positive in certain periods, such as 2013–2014 and 2017–2018. Furthermore, the negative correlations in high frequency intrinsic mode functions (IMFs), with a shorter time horizon, are weaker and display time‐varying characteristics, whereas the correlation in low frequency IMFs, with a longer time horizon, are stronger and more static. The findings of this article may have important implications for investors to construct optimal portfolio diversification.