Some traders are puzzled when both the VIX index and the SPY ETF end with the same return sign for a day, but that is nothing unusual and a frequent occurrence.
Days with the same sign for the VIX index and SPY ETF are more common than some traders believe. This is shown in the chart below.
The chart shows daily data for the SPY ETF and VIX, along with a histogram of the difference when the returns have opposite signs and the count of opposite-sign daily returns in a rolling 252-day period.
The percentage of opposite-sign returns is 76.65%. This means that same-sign daily returns have a frequency of 23.3%, and they are much more common than some traders think.
Since 1997, the count of opposite returns in a rolling 252-day period has moved between 180 and 222, with an average of around 194.
Also in the weekly timeframe, the frequency of same-sign returns is 22.1%.
Even in the monthly and quarterly timeframes, the frequency of the same sign returns remains high at 23.2% and 25.4%, respectively.
Traders should not be surprised when the VIX index and SPY ETF finish a day with the same sign, up or down. As the data show, this is more frequent than most believe.
Disclaimer: No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.
