How stock and volatlity ETFs compare. S&P 500 (SPY) and VIX Short-Term Futures (VXX)

The Stock Market (S&P 500) has returned on average 1.4% per month and the Volatility ETF (VXX) has returned -4.6% per month. This data goes back to 2009. Where the returns have a -0.76 correlation.

Monthly Returns	SPY	VXX
count	154	154
mean	1.4%	-4.6%
std	4.1%	19.3%
min	-12.5%	-35.2%
25%	-0.6%	-15.6%
50%	1.9%	-8.6%
75%	3.7%	2.3%
max	12.7%	102.8%

The Monthly Return Distributions

SPY and VXX Monthly Returns - unpackinvesting.com
Takeaways

SPY and VXX are strongly negatively correlated with -0.76 since VXX inception
The monthly magnitude of returns is about -3x times with almost 5x times the volatility.
With the strong negative correlation and greater volatility VXX can make a great hedging vehicle for SPY or shorting VXX can be utilized as a more capital efficient exposure tool (leverage).
Further interesting research can include testing if VIX levels have any forecasting ability in SPY and VXX in returns or volatility

Comments

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