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Below is a calculation of the cross-sectional standard deviation of returns across the universe of emerging market ETF’s (shown as a five-day moving average).

The degree of diversification as gauged by the dispersion of daily returns is at or close to a multi-year high. This is due to a combination of

  1. Idiosyncratic factors, such as politics in Brazil and Turkey;
  2. Different responses to shocks, e.g. the threat of trade war; and
  3. Different responses to tighter monetary conditions.

That said, the larger EM equity ETF’s have been trending in the same direction, as the chart below shows.