Correlation Analysis Between The Price of Leo Token And Binance Token
I have been carrying out series of correlation test in order to make investors of leo token feel safer when investing in it. You can check my blog for previous post.
In this article, the correlation analysis between the price of leo token and that of binance otherwise known as BNB will be measured.
Image Source- coinmarketcap.com
Image Source- binance.com
In the course of this article, I shall tend to elaborate on the following points. They are: what is correlation test and theories of correlation, data collection and entry of leo token and bnb prices from May 6 – May 20, 2022, data analysis and result interpretation using the spss software.
What Is Correlation Test Correlation test is been defined as a test that seeks to find the relationship between variables of concern. The variables we are concerned about is that of leofinance and that of binance using a 14 day period.
Sometimes when it is only two variables, It is referred to as bivariate correlation. Bivariate simply means there is a consideration of only two (bi) variables.
The theories attached to correlation analysis are;
Hypothesis Hypothesis is a statement of fact of a data depending on the nature of test concerned about. The null hypothesis for correlation test is that there is no relationship between the variables in consideration the alternate is the opposite.
Secondly, the correlation coefficient is determined by considering the following fact.
Positive correlation A positive correlation indicates that the higher one variable, the higher the other variable. This entails the coefficient of correlation is positive as well and tends towards a positive one.
Negative correlation A negative correlation between two variables indicates that the coefficient is negative as well and tends towards a negative one. Meaning that the higher one variable, the lower the other variable as well,
Zero correlation Zero correlation indicates that there is no relationship at all between the variables in consideration and the correlation coefficient on a number line tends towards zero.
However relationship of variables might be weak or strong.
The coefficient of correlation resides on a line of -1 to 0 to +1. As it tends towards any of the point simply indicates the type of correlation.
The data below shows the price of leo token and binance. It was entered using the variable,
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and data view mode of spss.
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We shall be making use of 68 sample prices from coin gecko
Using scatter plot diagram as shown below,
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the direction of relationship tends to be positive but we have to confirm the strength of positivity. The points are scattered on the right axis as can be seen. From our scatter plot, the direction of correlation tends to be a positive one.
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Lets now proceed to our correlation analysis result to see if it agrees with the hypothesis or not.
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As seen below, the result of our analysis shows the correlation coefficient to be 0.3 which indicates a weak positive relationship though we cannot really say that as the price of bnb goes higher, the price of leo token will also go high.
Considering the hypothesis, we can see that the significance level should be something less than 0.05 but our significance level is 0.008 which is lesser than 0.05. thus we can reject the null hypothesis that say there is no relationship between the two tokens.
Conclusion
It has been statistically analyzed that there is a positive but weak relationship between the price of leo token and that of binance which indicates relationship by chance though we cannot say both are pairwise correlated meaning that as binance goes up the price of leo may or may not go up.
