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S&P 500 and VIX: Shifting Correlations

Market Measures

This week saw an unusual shift in the S&P 500 and VIX correlation. Typically, these two indices exhibit a strong negative correlation, we now see a weak negative correlation. Does this mean anything to us?

At first glance we see the average correlations are close to negative -0.80, we now see a -0.10 correlation.

Looking back, we have seen multiple occurrences where the correlation was this weak. However, it is a rare occurrence.

The VIX levels when correlations have been this weak do not indicate consistent market extremes associated with weak correlation.

Finally, the guys analyzed 1 week and 1 month moves in the S&P after weak correlation compared to all occurrences. As expected, there was little to no evidence of a variation.

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