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Cross-correlations between Brazilian biofuel and food market: Ethanol versus sugar

Cristiane Rocha Albuquerque Lima, Gabriel Rivas de Melo, Borko Stosic and Tatijana Stosic

Physica A: Statistical Mechanics and its Applications, 2019, vol. 513, issue C, 687-693

Abstract: We investigate intrinsic correlations between Brazilian energy (ethanol) and food market (sugar) by applying recently introduced method Detrended partial cross correlation analysis (DPCCA) on returns and volatility series of sugar, ethanol and crude oil prices. The results show that intrinsic cross-correlations between ethanol and sugar are positive and increase with time scale for both returns and volatility, indicating that the diversion of sugar cane for biofuel production (due to the variations in ethanol prices), affects more sugar prices than the price movements in external energy market. Ethanol/oil volatility series and sugar/oil return series do not show correlations for small scales, while at larger scales intrinsic correlations become negative. The intrinsic correlations in oil/ethanol return series and oil/sugar volatility series show similar behavior as corresponding ethanol/sugar series, indicating the existence of strong correlations between sugar and ethanol price variations.

Keywords: Cross-correlations; Biofuel; Food market (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:phsmap:v:513:y:2019:i:c:p:687-693