VIX Flashing Warning Signs? Diving into Short-Term SPX Divergence
In the short term, it appears that 'VIX Inverse' and 'SPX' tend to rise and fall together. However... ( Chart courtesy of Stockcharts.com ) Mean Reverting Assets vs Trending Assets Mean reverting assets: These assets tend to fluctuate around their historical average price and eventually return to that mean over time. They are not expected to show sustained upward or downward trends over longer periods. Trending assets: These assets exhibit sustained price movements in a specific direction (upward or downward) over time. They may experience temporary pullbacks or corrections, but the overall trend persists. Therefore, directly comparing the performance of mean-reverting and trending assets over longer timeframes wouldn't be very meaningful. They have different characteristics and respond differently to market forces. But... The statement "You don't compare mean reverting to trending assets over longer time periods" is generally true. While directly ...