relationship between VXX & XIV?

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relationship between VXX & XIV?

posted

Seeking Help Pairs Trading ETFs Stat Arb

What is the relationship between:

VXX, iPath S&P 500 VIX Short-Term Futures ETN
XIV, VelocityShares Daily Inverse VIX Short-Term ETN

Naively, I'd think that an equal-weight portfolio should return zilch, but instead the return is highly negative.

If I run the attached algo on:

SPY, SPDR S&P 500 ETF
SH, ProShares Short S&P500

I get something much closer to zilch return over the same time period.

Is there something different about the VXX-XIV pair, compared to SPY-SH?

3 responses

Grant,

I am not extirely sure but I think this may be explained in the article on volatility trading that I sent you.

Regards,

Tim

Hi Grant, Tim,

This may help in visualizing the relationship: xiv vs vxx historical performance chart

Hi Serge,

Very interesting, many thanks!

Any easy way of exploting these (co)rrelations between the three ETFs ? -:)

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.