Gold vs VIX

G

guru

Interesting strategy:
https://www.quora.com/Is-there-any-...e-used-in-a-pair-trade/answer/Aaron-Brown-165
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Q: Is there any relationship between the volatility index and gold, and can securities that are either long or short on these factors be used in a pair trade?

A: They are good pair trade candidates because they are cointegrated but close to uncorrelated. When gold sells for more than 80 times the VIX (e.g. gold above $1,600 while VIX is below 20%) go long VIX and short gold; when gold sells for less than 80 times the VIX, go long gold and short VIX.
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9.7% with 8.1% STD beats SPY at 13.74% return with 13.29% STD by about 16% in risk-adjusted total return.

Still, he is creating a ratio between a normalized and non-normalized series. Oops.
 
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The person who answered that question did mention that this isn't a practical strategy, so I think it was just something quickly put together for illustrative purposes.
For me it was just interesting that such specific conclusions can be made about Gold vs VIX relationship. I was generally aware of it, but without such specific examples. So it may be something just to keep in the back of my mind.
 
xandman said:
9.7% with 8.1% STD beats SPY at 13.74% return with 13.29% STD by about 16% in risk-adjusted total return.

Still, he is creating a ratio between a normalized and non-normalized series. Oops.
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Yeah gold being an inflation adjusted thing by its very nature, and VIX not at all, seems to kill any interest I might otherwise have in this lol.
 
Unfortunately and as usual, this correlation study is far far too slow.
gold has been going up since 5 months ago and has appreciated by massive 40%.

It is too late to do any studies.
 
xandman said:
9.7% with 8.1% STD beats SPY at 13.74% return with 13.29% STD by about 16% in risk-adjusted total return.

Still, he is creating a ratio between a normalized and non-normalized series. Oops.
More...
As well as between, most likely, a tradable (Gold Futures) and non-tradable instrument (VIX index). All very theoretical.
 
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