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Doug Kass of Seabreeze Partners called attention to a nerve-wracking chart on Tuesday. It compares the Standard & Poor's 500 index with the VIX index, which shows a striking parallel to low VIX and an imminently steep decline in the markets.

The VIX indexes the volatility of all of the stocks in the S&P 500. That means if the S&P 500 is highly volatile, the VIX index climbs. VIX values above 30 typically reflect great volatility, while values below 20 reflect calmer markets. The VIX is at a multi-year low of 13.45. And according to this chart, we can expect a heavy drop-off any day now.

This is what the VIX and SPX looked like the last five times the VIX hit such lows:

Click to enlarge

According to Kass:

Typically, the decline in the markets, off of a low VIX is quick and relatively severe. On average the S&P dropped by about 10% (and took about two months to correct), with the smallest decline of 6% in February 2011 and the largest drop of 19% in July 2011. (If we go further back in history, the same relationships hold; complacent markets are almost always associated with market peaks and vice versa.)

Business Section: Investing Ideas

If you believe in this chart's uncanny predictive abilities, you're probably wondering what you can do to protect your portfolio.

With this in mind, we ran a screen to see which stocks perform well in times of high volatility, with a high positive correlation to the VIX index. That means if the S&P 500 is highly volatile, the VIX index climbs, and these correlated stocks tend to climb with it. Put another way, this chart suggests the VIX is about to change from a very low value to a higher one. The stocks below tend to rise (increase in share value) along with the VIX value.

We took only the names with correlations of 0.60 and higher to the VIX index and dividend yields between 3% and 7%.

Use this list as a starting point for your own analysis. Do you think these high yield stocks can help hedge against a drop in the market?

1. Mercury General Corporation (NYSE:MCY): Engages in writing private passenger and commercial automobile insurance in the United States. Market cap at $2.08B, most recent closing price at $37.97. Dividend yield at 6.43%. Correlation to the VIX index at 0.72.

2. GameStop Corp. (NYSE:GME): Operates as a retailer of video game products and personal computer (PC) entertainment software. Market cap at $2.54B, most recent closing price at $19.49. Dividend yield at 5.13%. Correlation to the VIX index at 0.60.

3. Canon Inc. (NYSE:CAJ): Through its subsidiaries, manufactures and sells network digital multifunction devices (MFDs), plain paper copying machines, laser printers, inkjet printers, cameras, and lithography equipment primarily under Canon brand in the Americas, Europe, Asia and Oceania. Market cap at $46.55B, most recent closing price at $34.90. Dividend yield at 4.51%. Correlation to the VIX index at 0.59.

4. AU Optronics Corp. (NYSE:AUO): Develops, produces, and sells thin film transistor liquid crystal displays (TFT-LCDs) and other flat panel displays to original equipment manufacturing service providers. Market cap at $2.61B, most recent closing price at $2.96. Dividend yield at 4.5%. Correlation to the VIX index at 0.61.

5. Safeway Inc. (NYSE:SWY): Operates as a food and drug retailer in North America. Market cap at $3.84B, most recent closing price at $16.04. Dividend yield at 4.38%. Correlation to the VIX index at 0.69.

6. Credit Suisse Group (NYSE:CS): Operates as a financial services company. Market cap at $23.88B, most recent closing price at $18.09. Dividend yield at 4.2%. Correlation to the VIX index at 0.64.

7. Quality Systems Inc. (NASDAQ:QSII): Develop and market healthcare information systems. Market cap at $1.12B, most recent closing price at $18.91. Dividend yield at 3.83%. Correlation to the VIX index at 0.67.

8. True Religion Apparel Inc. (NASDAQ:TRLG): Designs, develops, manufactures, markets, distributes, and sells apparel in North America, Europe, Asia, Australia, Africa, and South America. Market cap at $566.86M, most recent closing price at $21.98. Dividend yield at 3.55%. Correlation to the VIX index at 0.62.

9. Mine Safety Appliances Co. (NYSE:MSA): Develops, manufactures, and supplies health and safety products used by workers in the fire service, homeland security, construction, and other industries, as well as the military. Market cap at $1.36B, most recent closing price at $36.66. Dividend yield at 3.05%. Correlation to the VIX index at 0.61.

10. EarthLink Inc. (NASDAQ:ELNK): Provides communications services to individual and business customers in the United States. Market cap at $709.38M, most recent closing price at $6.71. Dividend yield at 3.01%. Correlation to the VIX index at 0.73.

Tool provided by Kapitall (www.kapitall.com). More investing ideas on Kapitall Wire (wire.kapitall.com).

Written by Rebecca Lipman. VIX data sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: 10 High Yield Dividend Stocks With Positive VIX Correlation