Correlation on Intrade

Over at Intrade, Hillary Clinton has shot up over the summer (67.9 for the Democratic nomination), while Barack Obama has plunged to 16.3. The correlation between Clinton’s contract and Obama’s contract is a strong -0.853. Basically, if one goes up, there’s a strong chance the other will go down by close to that amount.

The correlation means the Intrade traders have effectively deemed the Democratic nomination a two-person race with a small chance for someone else to break through, the same view put forth by the media.

The graph below (click on it to enlarge) shows Clinton’s contract price + Obama’s contract price starting a week after Obama’s announcement. You can see a steady trend upwards as the days until the first primary dwindle, showing the narrowing into a two-person race.

Graph

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