When shopping for shoes there’s a need to know what size to purchase or I suppose one could say whatever comes close.
Performances between the U.S. small-cap and large-cap indexes have been quite different so far in 2016. The small-cap as measured by the Russell 2000® Index (RUT) is down -14.66% compared to the large-cap S&P 500 Index -9.32% (based on closing prices 2/8/16).
RUT’s daily moves have been over 1.00% almost two-thirds of the trading days as illustrated below.
Managing risks is not a simple task when volatility is rising. The key is to find an effective hedging strategy offering protection with a non-correlating asset.
CBOE Russell 2000 Volatility Index (RVX)
The CBOE Russell 2000 Volatility Index (RVX) measures the (30-day) expected volatility in the Russell 2000 and carries a negative correlation to the Russell 2000 Index (-.831)*. RVX has closed higher in the last 7 consecutive trading days and is +46.19% y.t.d.
RVX vs. VIX
Often used as the standard for measuring volatility in the U.S. equity market, the CBOE S&P 500 Volatility Index (VIX) behaves similarly to RVX as highlighted by the graph.
With the small-cap. market segment underperforming the large-caps. by over 5% one might take a closer look at using the options & futures based on RVX traded at the CBOE.
For more information on CBOE Russell 2000 Volatility Index (RVX) visit: www.cboe.com/RVX