# Water cycle: Correlation

Prices it moves with, and why

Source page: https://www.materialinsights.org/energy/e_hydro/correlation/

The water cycle, rain and snowmelt running downhill, is free, but its value depends on dams and turbines to capture it, on competing claims for water from farms and cities, and on the power prices it displaces.
 No public price Water cycle has no public monthly price series: A free natural flow; no market price, only capture costs.

#### What its price moves with

 Energy [HyD Hydropower dams](https://www.materialinsights.org/energy/e_hydro_dams/)Main converter

Large dams store river flow and release it through turbines, turning the water cycle into power that can follow demand. The cost and value of a dam depend on the site, the rainfall and how flexibly it can run.
 Not enough overlapping price history to measure.

 Commodity [H₂O Water](https://www.materialinsights.org/commodities/water/)Competing use

The same river water is wanted for irrigation, drinking supply and power. In dry years, farms and cities get priority, so hydro output falls, and water rights or tariffs decide how much water power plants can use.
 Not enough overlapping price history to measure.

 Energy [Gas Natural gas](https://www.materialinsights.org/energy/natural_gas/)Rival source

When monsoons or snowmelt fail, hydro output drops and gas or coal plants fill the gap. Droughts in Brazil, China and India have raised fuel demand and power prices for this reason.
 Not enough overlapping price history to measure.

 Energy [HyR Run-of-river and small hydro](https://www.materialinsights.org/energy/e_small_hydro/)Main converter

Run-of-river and small hydro use the flow without large reservoirs, so their output follows the seasons more closely. They capture the water cycle in hill regions such as the Himalayas where big dams are hard to build.
 Not enough overlapping price history to measure.

 Energy [PHS Pumped hydro storage](https://www.materialinsights.org/energy/e_pumped_hydro/)Storage use

Pumped hydro uses spare power to pump water uphill and release it later. Natural inflow tops up some reservoirs, and the value of stored water rises as more solar and wind power needs balancing.
 No public price for pumped hydro storage, so the link is explained in words only.

How to read these numbers

**Correlation of monthly changes** (the number in the coloured pill) compares how much each price moved, month by month, since 2006 or the first month both series exist. It runs from −1 to +1: near +1 the two usually rise and fall in the same months, near 0 there is no link, and a negative number means they tend to move in opposite directions. Above 0.7 is strong, 0.4 to 0.7 moderate, 0.2 to 0.4 weak.

**12-month changes** compare year-on-year moves, which shows whether two prices share the same cycles even when the month-to-month noise differs.

**Price function** is a straight-line fit of the two prices on logarithmic scales: price ≈ k × (partner price)^β. β is how much this price moves, in per cent, for a 1% move in the partner over the whole period, and R² is the share of the variation the fit explains. Two prices that both drift up with inflation can fit well without any real link, so read it together with the monthly correlation.

**Lead or lag** checks whether the monthly correlation is clearly higher when one price is shifted by 1 to 6 months.

Correlation is not cause. The reasons on each card explain the economic link; the numbers show how strongly it has shown up in prices. Proxy series are US producer price indexes or related prices and can blur the real link.

Data: World Bank Commodity Price Data (Pink Sheet), October 2026; US Bureau of Labor Statistics producer price indexes, IMF primary commodity prices and US EIA prices via FRED, Federal Reserve Bank of St. Louis, retrieved November 2026. Calculations by this site.

## Other sections

- [Summary](https://www.materialinsights.org/energy/e_hydro/index.md)
- [Overview](https://www.materialinsights.org/energy/e_hydro/overview/index.md)
- [How energy resides](https://www.materialinsights.org/energy/e_hydro/resides/index.md)
- [Abundance](https://www.materialinsights.org/energy/e_hydro/abundance/index.md)
- [Fluctuation in time](https://www.materialinsights.org/energy/e_hydro/time/index.md)
- [Across the Earth](https://www.materialinsights.org/energy/e_hydro/geography/index.md)
- [Impact on nature](https://www.materialinsights.org/energy/e_hydro/nature/index.md)
- [Relationships](https://www.materialinsights.org/energy/e_hydro/links/index.md)