India Vix vs Nifty

India Vix, India’s Volatility Index, shows negative correlation with the Nifty which makes it a great hedging tool. I tried to find out the correlation between these two indexes. For the year 2010, the correlation comes out to be -0.92. So, traders can almost perfectly hedge there positions in nifty. However, the hedging strategies can only be finalised once the Futures and Options in indiavix are introduced by NSE. It will depend on the lot size of india vix and other parameters like liquidity and margin requirements etc. The Vix options in US markets are great hit and i hope the same for indian markets aswell.

India Vix Historical Data Compared with Nifty Historical Data

India Vix Historical Data is available on the NSE website at http://www.nseindia.com/content/vix/hist_vix_data.htm

Correlation = – 0.92

Date	Nifty	India Vix	Nifty Change	India Vix Change
4-Jan-10	5232.2	23.73	NA	NA
5-Jan-10	5277.9	22.21	0.87%	-6.41%
6-Jan-10	5281.8	22.1	0.07%	-0.50%
7-Jan-10	5263.1	22.29	-0.35%	0.86%
8-Jan-10	5244.75	22.41	-0.35%	0.54%
11-Jan-10	5249.4	22.45	0.09%	0.18%
12-Jan-10	5210.4	22.96	-0.74%	2.27%
……	……	……	……	……
……	……	……	……	……
30-Aug-10	5415.45	18.36	0.12%	-6.47%
31-Aug-10	5402.4	18.47	-0.24%	0.60%
1-Sep-10	5471.85	16.7	1.29%	-9.58%
2-Sep-10	5486.15	16.15	0.26%	-3.29%
3-Sep-10	5479.4	15.86	-0.12%	-1.80%

Date	Nifty	India Vix	Nifty Change	India Vix Change
4-Jan-10	5232.2	23.73	NA	NA
5-Jan-10	5277.9	22.21	0.87%	-6.41%
6-Jan-10	5281.8	22.1	0.07%	-0.50%
7-Jan-10	5263.1	22.29	-0.35%	0.86%
8-Jan-10	5244.75	22.41	-0.35%	0.54%
11-Jan-10	5249.4	22.45	0.09%	0.18%