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by Juan C. Dürsteler [message nº 99]

Impactopia uses the technology provided by the company Market Topology in order to visualise the correlations between equities in the market tree, making the taking of financial decisions easier.

We have already talked about financial visualisation a couple of times regarding the interesting visualisations of SmartMoney.com running on Treemaps (issue num 77 ) or about the attractive representation of NYSE history built by Unified Field for Goldman Sachs (issue num_78.htm). 

SmartMoney’s map of the market is very intuitive and allows you to catch the state of the stock exchange in the blink of an eye. When you want to get into deeper details the visualisation becomes much more conventional and we enter in the well known realm of plain numbers. Unified Field’s representation is elegant and attractive but it doesn’t allow us to find numerical correlations, it has a purely demonstrative purpose. 

Impactopia approaches the problem of financial visualisation from another standpoint. On one hand it computes the nearly 40.5 million correlations existing between the 19 markets it accesses. Among them you can find France, Germany, Holland, Italy, Spain, Switzerland, Europe and the United States.

The correlation coefficient between two equities gathers the history of the behaviour of both values and gives you the probability that in the case that one of them moves in a certain direction, the other move in the same direction, in the opposite one or just that it behaves in a completely independent way.

Map of the London market (900 equities). Every two values are linked by a "branch".  The colour indicates its correlation coefficient: blue means lower than  50% y yellow higher than 50 
Courtesy of Market Topology SPRL
Map of the Nueva York market  (around 5600 equities). Colours represent in this case the variations of price of up to 5%. red indicates losses and green gains. The map is 3D.
Courtesy of Market Topology SPRL

On the other hand, it uses these correlation coefficients in order to build complex tree-like visualisations that allow the users of the service (you can have a free subscription for 3 days) to study the relationship between equities and decide what to do according to this information.

For example, let’s suppose that the equities of a given company have been affected by a negative announcement (currently so frequent) lowering its value. With the tools provided by Impactopia you can build a scenario that allows you to know which other equities and values could be affected (even dragged?) by its correlation with the same. 

The visualisation of these and other indicators is made through a technology that is produced by the company Market Topology SPRL. The fundamental concept underlying these visualisations is that the market is a tree (a network or more specifically a connected graph). Apart from some lists that allow you to follow the least and most correlated pairs as well as the most influencial and the most vulnerable, Impactopia provides two interesting maps. 

  • Atomic map: generates a map of the neighbourhood of a particular equity within the market tree. The map can be navigated and you can see both the neighbourhood and the market as well.

  • Metro map: generates a trajectory of values that have a significant correlation between them. This provides a way to identify correlation chains that can lead to an eventual cascade of effects between correlated pairs that can be affected by each other.

Every branch of the market tree links two values and is coloured according to their correlation coefficient. With it you can find out, just by taking a look, what the most correlated values and the most independent ones are.

In both companies’ web sites you can find 2D and 3D animated examples that show this technology.

Another step in the long march of information visualisation, financial in this case, that pursues the slippery goal of instantaneous understanding of the complexity and its effects.

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