Background: The red line is an index, which goes from 0 to 100, measuring uncertainty in the markets.
The dark blue line is a price index, which has a lower bound at 0, and virtually no upper bound. However since it's a fixed income index, it will tend to hover around 100, compared to a stock index which can exhibit clear strong trends. Please ignore the light blue line.
The analyst in question compared the correlation between the uncertainly index levels (not returns) and ETF index levels (not returns), pre and post the financial crisis and concluded that there is a disconnect post crisis.
My question: Is such an analysis technically correct? I've always read about never regressing prices and always returns. Specifically,
a) Whilst doing a cointegration analysis, we would have regressed the two price time series and looked at the stationarity of the error term. We would have concluded that before the crsis, the error term was stationary and post cris, it is not. How does that analysis compare to simply regressing the two series like it's done here
b) Also, since these two times, by construction are somewhat stationary (as opposed to stock prices), would simply regressing the price series be okay here?