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VIX - movement


Guest TheDudeLondon

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Guest TheDudeLondon

Hi,

i am playing around with the VIX for a while and have noted an almost perfect negative correlation with the underlying S&P500 index. 

The negative correlation surprises me as the S&P hits all time highs. Especially as even on days with very low volatility where the index remains flat, the VIX will also remain flat. Usually I would expect such a substantial slowdown to yield a decline in VIX, but it seems like only increasing index values lead to a reduction in the VIX. 

Does someone have an intuitive explanation for that? 

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Hey @TheDudeLondon, thanks for you feedback message. 

Historically, the S&P 500 and the VIX volatility index move in opposing directions. They not only offer mirror performance to each other, they typically do so with the a matching intensity.

You can find DailyFX Chief Currency Strategist John Kicklighters article about this correlation by following the link below: 

 Correlation between VIX and S&P

He mentions how they normally act vs some rare occurrences when they correlate. 

I hope this helps :)

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