Correlation and hierarchies in financial markets

As an emerging financial market, the trading value of carbon emission trading market has definitely increased in recent years. The carbon emission is not only trading in carbon emitters but also has become an important investment target. To determine the mechanism of this growing market, we analyzed the EU allowances (EUA) price series in European Climate Exchange (ECX) that is the leading European emissions futures market. As other financial market, the absolute value of price change (volatility) in carbon emission trading market also shows long-term power-law correlations. Our analysis shows that definite cross correlations exist between EUA and many other markets. These cross correlations exist in wild-range fields, stock market index, futures of crude, sugar, cocoa, etc., suggesting that in this new carbon emission trading market the speculation behavior had already become a main factor that can affect the price change.