This week saw an unusual shift in the S&P 500 and VIX correlation. Typically, these two indices exhibit a strong negative, 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 consistentassociated 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.