European Debt Concerns Push VIX Index Higher

European Debt Concerns Push VIX Index Higher

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The Chicago Board Options Exchange Volatility Index (VIX) rose 8.4% for an eighth day over European Debt woes, while the S&P 500 fell 1.7%, according to Bloomberg. Spanish bonds dropped on the news that Economy Minister Luis de Guindos failed to rule out a need for a financial bail out. (STAY AHEAD OF THE CURVE: Follow Kapitall on Twitter)

Alphabet Management LLC’s CIO Nelson Saiers said, “The VIX movements reflect the increased fear off the recent performance of the S&P 500, the poor unemployment number, and rekindling of fears out of Europe focused on Spain and Italy.” The VIX index had reached its lowest level since June 2007 on March 26, while the S&P 500 rallied 12% in the first quarter, which is the biggest first-quarter run in 14 years. The VIX fell around 70% since early August, and has recovered 32% over the past 8 trading days.

Though the increases are significant, there is no panic in the volatility market, according to Group One Trading LP CEO Ben Londergan. He says that it is simply a rebound from low levels combined with a “healthy and legitimate sell-off of equities.”

Business Section: Investing Ideas

Do you think volatility will continue to increase? In case it does, we ran a screen on mega cap stocks (the 200 largest by market cap) for those that have shown to have a positive correlation to the VIX index over the last two months. This indicates that these stocks have tended to outperform when volatility spiked. Do you think these stocks will continue to rise if market volatility persists?

List sorted by market cap.

 

Use the Turbo Chart to Compare the Performance of the First Two Companies in the List to the S&P 500:

 

“1. McDonald's Corp. (MCD, Earnings, Analysts, Financials): Operates as a foodservice retailer worldwide. Market cap at $99.48B. Correlation with the VIX index at 0.605 over the last 60 days.

 

 

“2. NTT DOCOMO, Inc. (DCM, Earnings, Analysts, Financials): Provides wireless telecommunications services, packet communications services, and satellite mobile communications services in Japan. Market cap at $72.50B. Correlation with the VIX index at 0.802 over the last 60 days.

 

 

“3. Nippon Telegraph & Telephone Corp. (NTT, Earnings, Analysts, Financials): Provides telecommunications services to residential and business customers in Japan. Market cap at $59.04B. Correlation with the VIX index at 0.812 over the last 60 days.

 

“4. Hewlett-Packard Company (HPQ, Earnings, Analysts, Financials): Offers various products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. Market cap at $46.01B. Correlation with the VIX index at 0.563 over the last 60 days.

 

“5. Barrick Gold Corporation (ABX, Earnings, Analysts, Financials): Engages in the production and sale of gold, as well as related activities, such as exploration and mine development. Market cap at $41.50B. Correlation with the VIX index at 0.615 over the last 60 days.

 

“6. China Unicom (Hong Kong) Limited (CHU, Earnings, Analysts, Financials): Engages in the provision of GSM and WCDMA cellular, and related telecommunications services in the People's Republic of China. Market cap at $38.46B. Correlation with the VIX index at 0.8 over the last 60 days.

 

“7. Canadian Natural Resources Limited (CNQ, Earnings, Analysts, Financials): Engages in the exploration, development, production, marketing, and sale of crude oil, natural gas liquids, and natural gas. Market cap at $34.29B. Correlation with the VIX index at 0.62 over the last 60 days.

 

“8. Chunghwa Telecom Co. Ltd. (CHT, Earnings, Analysts, Financials): Provides integrated telecommunications services primarily in Taiwan. Market cap at $29.31B. Correlation with the VIX index at 0.749 over the last 60 days.

 

 

(Written by Danny Guttridge)

 

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