Chart 1 Correlation %XIV vs %VXX, Year 2011
showing good, negative, linear correlation (R squared = 0.994)
Click charts to enlarge
Chart 2 Correlation VXX vs XIV, Year 2011
showing some interesting patterns and voids
and pretty good, negative, exponential correlation (R squared = 0.914)
but not as good as Chart 1
Chart 3 showing VXX vs XIV, Year 2011 by month
Chart 5 showing VXX vs XIV, Year 2011
Chart 6 Google Finance Chart XIV vs VXX, Year 2011
showing percentage changes from Jan 3, 2011
Click here to read an article that also concludes its better to short VXX than go long XIV, as Charts 4,5 and 6 suggest too.
It may seem odd that VXX and XIV cross each other near zero % twice, then diverge with XIV down 46% and VXX down only 6% at year end. The primary reason for this divergence can be seen in Charts 4 and 5 — in the last 5 months of 2011, increased VIX volatility caused VXX price to increase significantly from its low, and XIV price to decrease significantly from its high. Contango contributed to decline prices.
The exponential regression equation
For exponential trend lines a transformation to a linear model takes place. The optimal curve fitting is related to the linear model and the results are interpreted accordingly.
The exponential regression follows the equation
The variables for the second variation are calculated as follows:
Calculate the coefficient of determination by
Besides m, b and r² the array function LOGEST provides additional statistics for a regression analysis.
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