Weird SPX/VIX Correlation

There are constant claims that volatility ETPs are impacting the market in strange ways. I don’t pretend to understand what caused the SPX/VIX correlation to break like it did in late March, but wanted to make note of it. Looking at the top chart you can see the correlation, with an average of -0.88. This obviously means that the correlation between the two is strongly negative – SPX goes down VIX goes up. What just came in March was SPX and VIX going up at the same time.

As you probably know, recently the S&P500 refuses to sell off, and when people pile into hedge that raises volatility. Much of this was due to the French election, but there was also a strange mini-breakdown in late December ’16.

The easy answer seems to be to blame it on the volatility ETPs (VXX, UVXY, SVXY, XIV, etc). I feel (anecdotally) that its more due to the fact that stocks do not want to sell off.

VIX SPX Correlation
Correlation Between the VIX and the S&P500 SPX

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