From the course: Algorithmic Trading and Stocks Essential Training

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Economic data and stock correlations

Economic data and stock correlations

From the course: Algorithmic Trading and Stocks Essential Training

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Economic data and stock correlations

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- [Instructor] Now that we understand a little bit about basic trading strategies for the VIX, we might want to go a little bit deeper and explore if there's any kind of relationships between the VIX or perhaps the broader stock market and some of the macroeconomic variables that we could gather through publicly available sources like FRED. To do that, I want to go through and calculate the correlation between the VIX and four different variables of interest. In particular, I'm going to look at the BBB bond yields, the BBB bond yields lagged by one day, GDP, the change in GDP, and the treasury rates. Now to do this, to explore these relationships, at least on a basic level, I'm simply going to start by computing the correlations between the VIX and a couple of the other variables that I'm interested in. And we'll start with the BBB bond indicator. What we observe here is that the correlation between the VIX and the BBB bonds…

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