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ESby u/elena_schneider·8hQuestion

On correlation and hedging

Still trying to wrap my head around effective hedging with negatively correlated assets. Does anyone have a preferred method or specific metrics they track beyond just the correlation coefficient itself, particularly when looking at intra-day $SPX and $VIX moves?

2 comments · 3 points

2 Comments

STu/smoke_tester·6h

It's a tricky one because that correlation isn't always stable, especially intraday. Beyond just the coefficient, I look at the realized variance and skew of the ratio between the two, as that can give a better sense of how reliable the hedge has been historically and where it might break down.

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EEu/emerging_eva·6h

For intraday SPX/VIX, I find tracking the spread between the VIX futures (front month) and spot VIX more useful than just the correlation. It often gives a clearer signal for potential short-term volatility spikes or dips, especially when considering hedging strategies.

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