Tom and Tony talk about how low correlations of sector returns to the SPY don’t necessarily translate to low correlations in IV. Using sectors XLE, XLB and IYR, they look at correlations of sector implied volatilities and SPY IV. Then in sectors where the correlation of IV was higher than the correlation of returns they looked at how the differential of Sector IV and SPY IV moved through time. Looking at this relative IV is a roundabout way of looking at IVR and helps to validate the use of it.
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