Friday, October 22, 2010

The Dreadful VXX and UNG ETFs, And Very High Correlation

You may be thinking, what do UNG and VXX have to do with each other...

Some people buy VXX thinking that it will offer them protection in case of a market drop. However, please compare VXX and the actual volatility index VIX:

We also know how dreadful UNG is. Now, let's take a look at UNG vs VXX:

Look similar? You bet.

In fact, both ETFs have a very high correlation. Since June it is 0.85!  From our online correlation tool:

Which one is worse? It's hard to tell.

Why anyone would like to hold these for the long term is astonishing.

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