Google and correlation madness

Some of you may have heard of Google Trends, a useful tool from Google that lets you plot the activity of popular Google search terms over time. As noted by Justin Wolfers at the Freakonomics blog, there are already some pretty useful applications of this tool; most notably, Google Flu Trends, which uses Google’s search data to try to predict flu activity.

Well, Google has now taken this a step further, with an fascinating new tool called Google Correlate, which allows you to upload any data series (preferably a weekly one) and see what search terms in the United States are most highly correlated with it (unfortunately they don’t have international data yet).

I’ve taken it for a spin, and interestingly, it works pretty well. Let’s take US gasoline prices as an example. One of the most highly correlated search terms here is “best suv mpg”. As you can see below, every time petrol prices spike, there is a corresponding spike in the number of Google searches for fuel efficient SUVs.

Let’s now move on to the US weekly jobless claims data, one of the most useful gauges of the US job market. Not surprisingly, “filing for unemployment” comes near the top of the list with a correlation of more than 0.9. Another popular search term is “government help.”

And finally, I present to you the perfect correlation: the US monetary base and the search term: “is smoking weed bad?”

If there are any hedge fund managers out there, there might be a profitable trading strategy behind this.

Food for thought.

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Comments

  1. Is this a trend we should watch for ?
    “Heinz Australia will shed more than 300 jobs when it moves some of its Victoria, NSW and Queensland operations to….. New Zealand.”

    • Let’s hope the NZ dairy cows don’t break
      into the their new ‘Heinz factory’ one night…
      We might have new shore-lines by morning.
      cheers JR

  2. I find this very interesting: Search for “housing bubble” in USA peaked in July 2005 a year before prices started falling. Search for the same term in Australia peaked in Dec 2009.

  3. Very cool and thanks for sharing this. Could be very useful if you know the validity of the data set.

  4. Wonder what the correlation is like between Australian house prices and interest rates.

  5. As much as it is a powerful search tool etc, Google keeps records of all your inquiries and sends all your inquiries to the NSA. It also places a unique tracking ID cookie on your system tracking your IP address.

    For those of you that wish to be more discrete – use Startpage.com or scroogle.org/cgi-bin/scraper.htm. These help mask your details whilst interfacing with Google.

    • The_Mainlander

      And a silver foil hat.

      🙂

      I love Cookies and Googles 100 year cookies are tastiest!

      🙂

      • Mainlander, I’ll take your silver foiled hat and cash it in.

        How do I know this? I’m in the software industry and have a close friend in ASIO.

        Google is just the tip of the iceberg mate. Everything we do today via the internet and our mobile phone is recorded.

        Rotten Apple – you’re right, it was off topic but I couldn’t help myself 🙂

  6. hehehe – the joy of statistics. i remember as an undergrad a textbook example showing the almost perfect (r=1) correlation between ice cream sales and shark bites.

  7. Lighter Fluid

    Australian quarterly filings for bankruptcy correlates highest with “blackberry device manager” (r=0.96)…

    “local jobs” at no. 2 makes more sense(r=0.955).

    blackberry device manager predicts an upward trend, whereas local jobs predicts downward trend. Lets see what happens eh?