Author: Stavros Stavroglou, Athanasios Pantelous, Hui Wang

# Multiple Series Pattern Causality Analysis: Unveiling System-Wide Interactions

#### Stavros Stavroglou, Athanasios Pantelous, Hui Wang

This vignette provides a comprehensive demonstration of multivariate pattern causality analysis, a powerful technique for investigating complex interactions within large-scale systems. This approach is particularly useful when dealing with multiple interconnected time series, allowing us to move beyond pairwise analysis and understand system-wide dynamics. The key aspects of this analysis include:

1. Matrix-based causality assessment: Quantifying causal relationships between all pairs of time series in the system, represented in a matrix format.
2. System-wide pattern identification: Identifying recurring patterns of behavior across the entire system, revealing underlying dynamics.
3. Visualization of complex causal relationships: Using graphical representations to make intricate causal networks more understandable.
4. Analysis of effects across the entire system: Measuring the overall impact of causality within the system, providing insights into the collective behavior.

The matrix-based approach is particularly well-suited for the study of:

- Financial market networks: Analyzing the interconnectedness of stock prices and other financial instruments.
- Economic systems: Understanding the relationships between various economic indicators and their impact on the overall economy.
- Social networks: Investigating the spread of information and influence within social structures.
- Complex ecological systems: Studying the interactions between different species and environmental factors.

## Pattern Causality Matrix

In this vignette, we will utilize the DJS dataset, which comprises 29 stock price series. This dataset provides a sufficiently large and complex system to demonstrate the capabilities of our multivariate pattern causality analysis.

    library(patterncausality)
    data(DJS)
    #head(DJS)

Before estimating the causality matrix, it is crucial to determine the optimal parameters for our analysis. These parameters, including the embedding dimension (`E`) and time delay (`tau`), significantly influence the accuracy and reliability of the results. We use the `optimalParametersSearch` function to identify these optimal values:

    dataset <- DJS[,-1] # remove the date column
    params <- optimalParametersSearch(
      Emax = 3,
      tauMax = 3,
      metric = "euclidean",
      dataset = dataset,
      verbose = FALSE
    )
    print(params)

With the optimal parameters identified, we can now estimate the pattern causality matrix using the `pcMatrix` function. This function calculates the causality between all pairs of time series in the dataset, resulting in a matrix representation of the system’s causal structure.

    result <- pcMatrix(
      dataset = dataset,
      E = 3,           # Embedding dimension
      tau = 1,         # Time delay
      metric = "euclidean",
      h = 1,           # Prediction horizon
      weighted = FALSE  # Unweighted analysis
    )

The resulting analysis yields three matrices, each representing a different aspect of causality: positive, negative, and dark causality. These matrices can be accessed through the `pc_matrix` object.

    print(result)
    #> Pattern Causality Matrix Analysis:
    #>
    #> Number of items: 29
    #>
    #> Positive causality matrix:
    #>                        X3M American.Express     Apple    Boeing Caterpillar
    #> X3M                     NA        0.2261268 0.2224979 0.2565688   0.2549020
    #> American.Express 0.2318415               NA 0.2198748 0.2522231   0.2511664
    #> Apple            0.2283262        0.2680412        NA 0.2622407   0.2674617
    #> Boeing           0.2507485        0.2711864 0.2869058        NA   0.2675737
    #> Caterpillar      0.2330168        0.2438080 0.2966432 0.3024545          NA
    #> ...
    #>
    #> Negative causality matrix:
    #>                        X3M American.Express     Apple    Boeing Caterpillar
    #> X3M                     NA        0.2421696 0.2406948 0.2295209   0.2405732
    #> American.Express 0.2523844               NA 0.2480438 0.2174616   0.2192846
    #> Apple            0.2592275        0.2353952        NA 0.2456432   0.2248722
    #> Boeing           0.2649701        0.2397094 0.2243536        NA   0.2290249
    #> Caterpillar      0.2556611        0.2291022 0.2209212 0.2019002          NA
    #> ...
    #>
    #> Dark causality matrix:
    #>                        X3M American.Express     Apple    Boeing Caterpillar
    #> X3M                     NA        0.5317036 0.5368073 0.5139104   0.5045249
    #> American.Express 0.5157740               NA 0.5320814 0.5303153   0.5295490
    #> Apple            0.5124464        0.4965636        NA 0.4921162   0.5076661
    #> Boeing           0.4842814        0.4891041 0.4887406        NA   0.5034014
    #> Caterpillar      0.5113221        0.5270898 0.4824356 0.4956453          NA
    #> ...

The `plot` function for object `pc_matrix` provides a powerful tool for visualizing these complex matrices. By plotting each causality type separately, we can gain a deeper understanding of the system’s dynamics.

- Positive causality status

    plot(result, "positive")

- Negative causality status

    plot(result, "negative")

- Dark causality status

    plot(result, "dark")

The visualization reveals a clear positive connection within the system, indicating a tendency for stocks to influence each other positively.

## Pattern Causality Effect

Following the matrix calculation, we can quantify the total effect within the system using the `pcEffect` function. This function aggregates the causality measures to provide a system-wide perspective on the overall impact of pattern causality.

    effects <- pcEffect(result)
    print(effects)
    #> Pattern Causality Effect Analysis
    #> --------------------------------
    #>
    #> Positive Causality Effects:
    #>                     received exerted   Diff
    #> X3M                   650.70  634.25  16.45
    #> American.Express      630.98  650.71 -19.72
    #> Apple                 661.12  660.70   0.42
    #> Boeing                688.59  688.43   0.15
    #> Caterpillar           701.02  682.44  18.58
    #> Chevron               650.07  635.85  14.22
    #> Cisco.Systems         579.50  632.94 -53.44
    #> Coca.Cola             634.74  627.41   7.34
    #> DowDuPont             668.46  668.23   0.23
    #> ExxonMobil            612.87  591.98  20.88
    #> General.Electric      623.13  622.74   0.39
    #> Goldman.Sachs         599.67  662.85 -63.18
    #> IBM                   669.13  634.43  34.70
    #> Intel                 640.67  626.83  13.84
    #> Johnson...Johnson     647.65  601.69  45.96
    #> JPMorgan.Chase        600.89  615.90 -15.01
    #> McDonald.s            653.29  662.28  -8.99
    #> Merck                 608.59  645.31 -36.72
    #> Microsoft             615.45  605.13  10.32
    #> Nike                  652.96  679.98 -27.02
    #> Pfizer                605.23  605.80  -0.57
    #> Procter...Gamble      620.69  570.01  50.67
    #> The.Home.Depot        636.16  682.05 -45.89
    #> Travelers             613.74  581.12  32.62
    #> United.Technologies   625.72  664.30 -38.58
    #> UnitedHealth.Group    621.44  637.87 -16.43
    #> Verizon               630.72  623.24   7.48
    #> Walmart               669.86  594.11  75.75
    #> Walt.Disney           643.93  668.38 -24.45
    #>
    #> Negative Causality Effects:
    #>                     received exerted   Diff
    #> X3M                   719.26  729.68 -10.41
    #> American.Express      712.08  700.91  11.17
    #> Apple                 707.09  687.52  19.57
    #> Boeing                703.02  676.41  26.60
    #> Caterpillar           678.31  676.03   2.28
    #> Chevron               715.89  737.31 -21.42
    #> Cisco.Systems         752.02  724.54  27.48
    #> Coca.Cola             712.08  759.47 -47.40
    #> DowDuPont             712.68  674.83  37.85
    #> ExxonMobil            748.99  767.41 -18.42
    #> General.Electric      678.39  734.08 -55.69
    #> Goldman.Sachs         792.84  689.82 103.02
    #> IBM                   706.97  731.20 -24.23
    #> Intel                 723.44  705.11  18.33
    #> Johnson...Johnson     724.40  743.30 -18.90
    #> JPMorgan.Chase        735.29  734.19   1.10
    #> McDonald.s            694.97  716.52 -21.56
    #> Merck                 739.65  709.82  29.83
    #> Microsoft             719.92  762.08 -42.16
    #> Nike                  717.16  654.36  62.80
    #> Pfizer                711.68  739.91 -28.23
    #> Procter...Gamble      715.60  815.15 -99.54
    #> The.Home.Depot        734.57  662.25  72.32
    #> Travelers             734.16  780.05 -45.89
    #> United.Technologies   741.72  708.36  33.35
    #> UnitedHealth.Group    735.82  714.69  21.13
    #> Verizon               744.45  730.70  13.74
    #> Walmart               693.07  760.45 -67.38
    #> Walt.Disney           692.26  671.61  20.65
    #>
    #> Dark Causality Effects:
    #>                     received exerted   Diff
    #> X3M                  1430.04 1436.07  -6.03
    #> American.Express     1456.93 1448.38   8.55
    #> Apple                1431.79 1451.78 -19.99
    #> Boeing               1408.40 1435.15 -26.75
    #> Caterpillar          1420.67 1441.54 -20.87
    #> Chevron              1434.04 1426.84   7.20
    #> Cisco.Systems        1468.48 1442.52  25.97
    #> Coca.Cola            1453.18 1413.12  40.06
    #> DowDuPont            1418.86 1456.95 -38.08
    #> ExxonMobil           1438.15 1440.61  -2.46
    #> General.Electric     1498.48 1443.18  55.30
    #> Goldman.Sachs        1407.49 1447.33 -39.84
    #> IBM                  1423.91 1434.37 -10.47
    #> Intel                1435.88 1468.06 -32.17
    #> Johnson...Johnson    1427.95 1455.01 -27.06
    #> JPMorgan.Chase       1463.82 1449.91  13.91
    #> McDonald.s           1451.75 1421.20  30.55
    #> Merck                1451.75 1444.87   6.89
    #> Microsoft            1464.63 1432.79  31.84
    #> Nike                 1429.88 1465.66 -35.78
    #> Pfizer               1483.09 1454.29  28.80
    #> Procter...Gamble     1463.71 1414.84  48.87
    #> The.Home.Depot       1429.27 1455.70 -26.43
    #> Travelers            1452.10 1438.83  13.27
    #> United.Technologies  1432.56 1427.34   5.22
    #> UnitedHealth.Group   1442.74 1447.44  -4.70
    #> Verizon              1424.83 1446.06 -21.22
    #> Walmart              1437.07 1445.44  -8.37
    #> Walt.Disney          1463.81 1460.01   3.80

The total effect of pattern causality can be observed, providing a measure of the overall strength of causal interactions within the system.

- Positive causality status

    plot(effects, status="positive")

- Negative causality status

    plot(effects, status="negative")

- Dark causality status

    plot(effects, status="dark")

## Cross Matrix analysis

Sometimes, we also need to face the problem that X has multiple series, and Y also has multiple series, we want to know the causality between each series in X and each series in Y, to save the computation time, we can use the `pcCrossMatrix` function to get the causality matrix from each series in X to Y.

This time we construct the datasets for X and Y in stock dataset.

    dataset <- DJS[, -1]

    X <- dataset[, 1:10]
    Y <- dataset[, 11:29]

Then we can estimate the causality matrix from each series in X to Y and give the new matrix from X to Y.

    result_cross <- pcCrossMatrix(
      X = X,
      Y = Y,
      E = 3,
      tau = 1,
      metric = "euclidean",
      h = 1,
      weighted = FALSE,
      verbose = FALSE
    )

The new matrix will be saved in the `result_cross` object, we can also plot the matrix by the `plot` function.

    plot(result_cross, "positive")

This will show the causality matrix from each series in X to Y and the color of the matrix represents the causality strength in the whole period.

We provide the multiple types of multi-series pattern causality analysis here and it would be useful to face many different situatiuons for the matrix analysis and network analysis.