Factor loadings for ML1 (The "Equity/Market" Factor): SP500 dominates this factor with a massive loading of 0.87. Nikkei has a negative loading (-0.39), suggesting that it moves inversely to this specific factor. #statistics,#factoranalysis, #sp500, #nikkei225, #brent, #gold
Factor loadings for ML2 (The "Global Sentiment/Commodity" Factor) : Nikkei225 (0.78) and Gold (0.59) load strongly here. Brent has a moderate negative loading (-0.49), suggesting it moves against the grain of whatever Nikkei and Gold are capturing. #statistics,#factoranalysis
3w T-Bills is a fail. Only 1.9% of its ariance is explained. In practical terms, this variable is just noise in this specific model and doesn't belong with the others. #statistics,#factoranalysis, #sp500, #nikkei225, #brent, #gold
In summary, Two-factor model effectively captures the variance of the S&P 500 and Nikkei, both of which show an inverse relationship with Brent. Gold follows a distinct trajectory, remaining largely decoupled from equity movements. #statistics,#factoranalysis, #sp500, #nikkei225
Note: Factor ML2 is dominant (27%) and ML1 is next (19%) of the total variance. These two factors capture 47%. While this is a solid start for a two-factor model, it suggests that over half of the data's fluctuations are still driven by unique or unexplained components.
The model identifies two largely independent forces. ML2 is the more influential driver, but because the Cumulative Var is 0.47, the model is moderately effective—it explains just under half of the total movement. Thanks for attention. EoD.
Factor loadings for ML1 are strongly positive for Gold, the S&P 500, and the Nikkei 225, but negative for Brent Crude, reflecting a co-movement between equities and gold that runs counter to oil dynamics during this period. #statistics,#factoranalysis, #sp500, #nikkei225, #brent
For a dataset of five variables, a total explained variance of 25% is relatively low, suggesting a single-factor model may not fully capture the market's underlying dynamics. #statistics,#factoranalysis, #sp500, #nikkei225, #brent, #gold