Hi

I am trying to correlate revenue with some economic factors (i.e. employment, house price index and CPI) however I can only find a correlation for the last 3 years and during the recession period, my correlations are all over the place. Has anyone else witnessed the same and can anyone shed some light on this?

Thanks

Please clarify what you mean by "revenue" - do you mean a particular company's revenue? I would think that for most businesses revenue is only slightly correlated to the economic factors you cited, if at all. What type of business is this?

Thanks for the reply

By revenue I mean a FTSE 100 retail company revenue which will be significant enough to be impcted by economic factors. Don't you agree?

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Originally Posted by wukuser

Thanks for the reply

By revenue I mean a FTSE 100 retail company revenue which will be significant enough to be impcted by economic factors. Don't you agree?

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I would think retail revenues would be correlated in some way to CPI, but it would be a long term effect. You would probably have to look at inflation vs revenue over the last 20 years to see it, not just three years. As for house prices I would think the same thing - you need to check long term correlations. Unemployment I would guess would have a more short term effect, especially for those retailers that tend to serve middle class and working poor - I would bet that companies like Walmart and Target are probably more impacted by unemployment rates than, say, Tiffany or Gucci.

You might corrolate revenue with interest rate movements, depending upon which economy you are analysing. I have found that change is interest rates definitely impact on some corporate revenues as consumers loose confidence if there are frequent changes. Depending upon the market split you may want to corrolate some components of the CPI. If correlations are all over the place then you would be reporting that there is not significant correlation during the recession and if you have found correlation in more recent times then you can report significant correlation during this period. What you are seeing is that there is interaction in a number of factors and local market conditions such as the specific locations the company operates in may be significant factors