Interesting strategy: https://www.quora.com/Is-there-any-...e-used-in-a-pair-trade/answer/Aaron-Brown-165 ===== 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. =====
Not sure how he calculated the yearly return since Gold lost 45% 2011-2015 Anyone 9.7% annual nothing to brag about.
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.
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.
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.
As well as between, most likely, a tradable (Gold Futures) and non-tradable instrument (VIX index). All very theoretical.