Goldman Sachs: VIX / S&P Correlation Off, New Volatility Range Ahead

If volatility is an eye to the markets soul, 2016 has seen odd correlations between the VIX and the underlying price action of the S&P 500. Certain analysts look at VIX / SPX relationship, and overlay it with other indicators, to determine the force of market trends. Such oddity has made such analysis challanging. Goldman Sachs options researcher Krag Gregory, in a January 25 research report, confirms this, noting the “VIX has undershot S&P 500 daily moves by an aggregate of about 6.5 vol points year-to-date.”  Indeed, the VIX correlations acting odd are unusual, particularly when considering how the VIX has been behaving in the “Red Zone,” as Gregory deftly notes.