Thinking about buying UNG and VXX ? Think again; Are they different? Think again!

Some investors like to buy the UNG and the VXX ETFs (ETN for VXX), seemingly two very different ETFs. Well, they are both extremely poor performers because both suffer from the same rollover that relentlessly eat way at the underlying without doing anything.

UNG rolls over natural gas future contracts,  VXX trades VIX (S&P500) volatility futures. Both are in contango, and both instruments lose between 10%-30% every month as the contracts are swapped: same $ value, worth fewer contracts every month, then the price decays, and the cycle continues.

Why would anyone buy something that loses value just by sitting around?

Using our online correlation tool, one can easily determine the correlation between any stocks or ETFs (up to 4 of them actually). The correlations are consistently over 0.83 for the last several months.

Since June 1st:

Since July 1st:

Since August 1st:

Since September 1st:

Since October 1st:

Run, do not walk.