GOOG VIX - Useful or more Clutter?

Most traders are familiar with the VIX index as a measure of volatility for the S&P500 index.  In theory, as volatility increases the S&P500 should move lower. If volatility decreases (in theory) the S&P500 should move higher.  However, sometimes the relationship is stronger than others. 

Recently a GOOG volatility index was created. Depending on your software vendor the symbol is VXGO or VXGOG.  Now the question is can you use this indicator like the S&P500 VIX? let's take a look....

Below is a chart plotting GOOG and VXGO. As the chart shows, there is an inverse relationship but this relationship can be weak at times.



 Compare the GOOG relationship with that of the S&P500 and you will see that the S&P500 VIX relationship is much stronger.

S&P500 VIX

What does this all mean for the trader of GOOG? should you use the VXGO to trade GOOG? 

That is up to you, but I would suggest that while there is a negative relationship, it is somewhat weak and not consistent.  Traders might use the index when it is correlated but don't count on the index to be a good leading indicator of the movement of GOOG stock.












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