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VIX Proxy ETFs With Above 50% Correlation Over the Last 50 Sessions As Of September 13th, 2007

Posted September 14th, 2007 by Michael J Bomma...

    In the same vein as my past VIX ETF proxy posts, I've calculated the daily log-return of the VIX and found all those ETFs with over positive 50% correlation to it. These ETFs should be representative of the next best way to easily achieve a volatility proxy in your portfolio.  I've also included the correlation of these top ETFs with each other over the past 50 sessions, as that should likewise allow for some further diversification.

    The majority of these are obviously short to the indexes, but it's interesting as well to note that the fixed-income treasury and bond ETFs do a decent job.  The fact that most ETF portfolios should already include a decent weight of these fixed-income ETFs means that achieving such a proxy should be less difficult than one might assume.

ETFs with VIX Correlation Above 50%

Symbol R
SDS 89.4%
SH 88.6%
DXD 87.6%
MZZ 86.9%
DOG 86.8%
MYY 86.0%
QID 84.3%
PSQ 80.3%
SHY 69.8%
IEF 62.4%
AGG 54.4%
TIP 52.1%

Correlation Matrix of ETFs with VIX Correlation Above 50%

  SDS SH DXD MZZ DOG MYY QID PSQ SHY IEF AGG
SH 63.54%                    
DXD 60.03% 97.81%                  
MZZ 86.73% 74.42% 70.44%                
DOG 63.51% 91.56% 90.07% 69.75%              
MYY 59.22% 91.12% 90.32% 69.40% 96.93%            
QID 54.99% 87.73% 89.04% 64.68% 89.29% 90.10%          
PSQ 54.97% 89.41% 90.35% 67.57% 88.72% 90.68% 94.23%        
SHY 58.96% 96.75% 96.56% 71.82% 93.57% 94.88% 88.86% 90.78%      
IEF 59.85% 96.46% 95.81% 72.57% 93.47% 94.77% 88.68% 91.30% 98.88%    
AGG 80.56% 80.37% 76.50% 89.04% 74.53% 72.85% 71.20% 74.65% 75.92% 76.43%  
TIP 83.23% 63.85% 59.39% 90.67% 56.12% 54.30% 51.78% 52.81% 57.04% 56.46% 79.95%