Cboe, S&P DJI to Develop S&P 500 Dispersion Index By Press Release - October 21, 2022 Cboe Global Markets, Inc., a leading provider of global market infrastructure and tradable products, announced plans to collaborate with S&P Dow Jones Indices (S&P DJI), the world’s leading index provider, to develop the Cboe S&P 500 Dispersion Index at its global Risk Management Conference (RMC) in Reykjavik, Iceland. For a well-diversified portfolio, dispersion is a measure of the spread of constituent returns over a defined period, such as a month. In practice, dispersion measures both the opportunity set for individual security selection within a portfolio, as well as the potential diversification achieved by their combination. Akin to the way that the Cboe Volatility Index® (VIX® Index) represents implied volatility of the S&P 500, the Cboe S&P 500 Dispersion Index is intended to represent the implied dispersion among S&P 500 constituents over a 1-month horizon, based on the prices of single stock and index options. “Cboe has been teaching market participants how to better measure, model and trade market moves through the 450-plus volatility and derivatives-based indices we’ve created over our nearly 50-year history,” said John Hiatt, Vice President, Cboe Labs. “We revolutionized investing with the creation of the VIX® Index, the first index to measure the market’s expectation of future volatility — and today, we continue our legacy of innovation with the Cboe S&P 500 Dispersion Index.” “Dispersion is recognized as one of the fundamental metrics of market risks. Unlike related measures of volatility, there hasn’t yet been a simple, tradeable, and standardized index that enables market participants to hedge and express their views on dispersion in the U.S. equity markets,” said Tim Edwards, Global Head of Index Investment Strategy at S&P Dow Jones Indices. “We are excited to collaborate with Cboe on the development of the Cboe S&P 500 Dispersion Index, to bring more transparency to the risk and opportunity set in the world’s most liquid equity benchmark.” Edwards will join Hiatt at RMC for a discussion and analysis of dispersion, underscoring the strength of Cboe and S&P DJI’s long-standing relationship and highlighting the companies’ shared commitment to drive innovation through rigorous data analysis and academic research. For decades, the campus-like setting and facilitated networking at RMC has provided Cboe staff with the unique ability to learn from and work closely with industry peers, customers and academics—inspiring the creation of new Cboe offerings that can enhance the trading experience. In an effort to formalize the value derived from conversations at RMC and other client interactions, the company also announced the formation of Cboe Labs, a new division dedicated to the creation, development and implementation of new ideas. “Driven by constant input from our customer base, Cboe Labs is a place where we research, test and iterate as rapidly as possible with a singular goal— to create value-add, disruptive, tradable products and services,” said Rob Hocking, Senior Vice President and Head of Cboe Labs. “Cboe Labs builds on our history of producing many ‘firsts’ for the market and the ongoing dialogue we have with industry peers and regulators on the issues impacting the markets.” The Cboe S&P 500 Dispersion Index is the first idea from Cboe Labs that will become reality. Cboe plans to develop a futures product on the index to be listed on Cboe Futures Exchange, subject to finalization of the methodology and regulatory review. To learn more about dispersion and correlation, visit www.cboe.com/us/indices/implied
Hit the link and also get on their distribution list. You already have much of the required understanding. There is value in knowledge!
Dispersion: the range (ie. spread) of volatility within a month (?) I don't understand it: the stddev (ie. volatility) already is a measure for dispersion, IMO. S.a. chart below. Does someone have a better explanation & example. Are volatility and dispersion two different numbers? S.a. https://en.wikipedia.org/wiki/Statistical_dispersion Update: Maybe a better explanation here: https://www.investopedia.com/terms/d/dispersion.asp Hmm. nope. Update2: Maybe this one: https://www.wallstreetmojo.com/dispersion/ Looks good Much maths. Maths doesn't lie Here's an example:
Link in OP does not work for me - something is blocking it, maybe its something on my computer. But what I am trying to figure out most about this product is where it fits in in one's portfolio, if at all. Volatility I get - if you think markets will drop unexpectedly you can buy it, rise or stay flat you can sell it, that sort of thing. But is there any correlation between "dispersion" and markets going up or down, or really anything else for that matter? Or is this just some random ass thing people might want to trade and its just there because people want to trade more stuff to trade?