As we all know the S&P and its implied vol, the VIX, generally move in opposite direction. To a large extent, the correlations makes sense. IV is one of the main drivers of the price of options, going long options is also going long IV. When the market drops, option prices, adjusted for the drop in the the S&P price, experience a further appreciation, the extra appreciation o the options above and beyond the the price movement can be attributed to an increase in IV. My question is when IV(the VIX) and SPX correlation breakdown from its usual inverse relationship( corr=-.95), what do you think this implies about future returns? Why does these instances occur? There are many times when the correlations drops to 0 and becomes positive!
Below is a picture with the 20 day correlation between the two indices.