Energy and Oil-Risk: validation report
The full evidence profile for this index. For how each test works, see the methodology.
| Matched stress gauge | Correlation | vs equity VIX | Timing |
|---|---|---|---|
| CBOE oil-volatility index (OVX) | 0.78 | 0.26 | Coincident |
The tightest match of the three indexes. It moves with real oil-market stress in real time (coincident, not leading). Its correlation with the generic equity VIX is lower (0.26) - energy shocks are often market-wide, but the index reads energy stress first.
55% of major events caught, about 6 days after onset. A spike counts as a catch if it lands within three weeks of the event. Coverage builds over days, so the smoothed index peaks about a week in - it flags the episode as it happens.
| Date | Event | Flagged within |
|---|---|---|
| 2022-02-24 | Russia invades Ukraine | 13 days |
| 2022-09-26 | Nord Stream pipeline sabotage | 10 days |
| 2024-04-13 | Iran's first direct strike on Israel | 6 days |
| 2025-06-13 | Israel strikes Iran / Hormuz risk | 6 days |
Examples of caught events; not the full 91-event calendar. Misses are events that never drew a large enough coverage surge, not events the index read wrong.
+0.9 SD above normal. Spike days score about 0.9 standard deviations above normal on text novelty, versus roughly zero on ordinary days - the index rises on genuinely new narratives, not repetition.
No, by design. It does not predict oil prices, volatility, or returns. Public markets price the same news in real time, so a broad coverage index is coincident by construction - confirmed by testing across horizons and both linear and non-linear models, with no edge.
Leads next-month CPI inflation. The standout result. Aggregated to a monthly series and tested against the next month's CPI print (2021-present), energy attention leads inflation at +0.34. The test is strict: the signal must beat the tradable oil-equity price, and it does - +0.30 after controlling for it, with a bootstrap p close to zero. It strengthens rather than weakens when the 2022 shock is excluded (+0.35), and it loads on headline rather than core inflation, so it is an energy-specific read, not generic risk-off. A macro nowcast, not a trading signal. Based on monthly data since 2021.
Descriptive validation - measured, not asserted; not investment advice. The shared method for every index is on the methodology page.