Replies to post #9074 on ajtj99's Market Pulse

[n83]

read somewhere..COMP-based ETF coming later this year.

[market_watcher]

OK, BULL, here are my responses.

Q1: What I'm saying is that the ratio of the NDX to both the QQQ implied volatility and the S&P 100 implied volatility is going to be different because the correlation between the QQQ and the S&P 100 is not perfect. That's going to lead to different results for the indicators.


Q2: I actually wouldn't(and I didn't)compare the volatility of the S&P 100 to the NDX to the volatility of the QQQ to the NDX. Especially at this point when the correlation between the S&P 500 and the NDX is near a 52-week low. You can check this at ivolatility.com, where they give "HISTORICAL 30-DAYS CORRELATION AGAINST S&P 500 Index (SPX)", which is not perfect, but gives you a good idea of what the correlation is.

Q3: Yes, it would be.

Q4: I don't think the raw calculation of the NDX to VIX ratio is adequate. You also have to take into account the correlation between the two assets that are being measured. One way to do this is to calculate the ratio, then multiply it by the correlation coefficient at the time of the calculation. This will give you a cleaner ratio as output.

Also, the 'third asset class' I was referring to is the NDX, which seems to be the asset whose direction(bullish or bearish)you want to predict, but it refers to the general problem of calculating this type of ratio without taking into account the correlation. I don't have any reason to condescend to you, BULL.

I hope that's helpful.