Country / Region ETFs Most Exposed To A Correction

Includes: EWA, EWJ, IDX, THD, VT, VTI
by: Richard Shaw

There is mounting concern about stocks getting ahead of themselves and anticipation of a correction. Today we looked at country and region funds for those most and least likely to be exposed to a pullback.

We used standard deviation (volatility) bands to look at the question to find country/region ETFs that in terms of volatility statistics have a 5% or lower chance of going higher versus going lower.

The 10 country or region funds of the 50 we studied that are most exposed to a correction in terms of their price position within standard deviation (volatility) bands around their 3-month averages are in order of exposure are:

  • (NYSEARCA:EWJ) Japan
  • (NYSEARCA:IDX) Indonesia
  • (NYSEARCA:EWA) Australia
  • (NYSEARCA:EIS) Israel
  • (NYSEARCA:EPP) Developed Asia ex Japan
  • (NYSEARCA:VTI) Total US stocks
  • (NYSEARCA:VT) Total World stocks
  • (NYSEARCA:EIRL) Ireland
  • (NYSEARCA:EPHE) Philippines
  • (NYSEARCA:THD) Thailand

These ETFs are also more than 10% above their 200-day moving averages, which is generally difficult to maintain as a differential.

Here is the data for those 10 ETFs:


1.64%B = the price position in the range defined by 1.64 standard deviations around the 63-day (3-month) moving average. A value of 1.0 is at the upper boundary and a value of 0.0 is at the lower boundary. These stocks are all above the upper 1.64 standard deviation boundary. Based on "normal" distributions a value of 1.64 implies that the probability of a higher price is only 5% (19-to-1 chance of a decline versus a rise).

C/SMA200 = the price divided by the 200-day simple moving average.

An Excel file with the data for all 50 ETFs is available for download from our RationalRisk site for those who join our email list, by linking from here.

We own IDX, EWA, and EPHE and are on close watch.

Here are charts from StockCharts for those 10 ETFS, plotting the 1.64%B and the 200-day moving average.

Note: Differences between the %B on the charts and the table come from 2 and possibly 3 sources. (1) the table uses yesterday's close, whereas the charts are as of afternoon today, (2) the table used Reuters closing prices, whereas StockCharts uses adjusted closing prices to factor dividends, and possibly (3) there could be minor differences in the way the two services calculate standard deviation (but we have no way of knowing if that is true or not).

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We did not include SPY (S&P 500) or IWM (Russell 2000) in our tabular study (using VTI for the whole US market), but add their charts here for those who would prefer either of those as comparators.

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Disclosure: QVM has positions in some but not all of these stocks in some but not all managed accounts: IDX, EWA, EPHE, SPY and IWM as of the creation date of this article (March 12, 2013). We certify that except as cited herein, this is our work product. We received no compensation or other inducement from any party to produce this article, but are compensated retroactively by Seeking Alpha based on readership of this specific article.

General Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice. You are responsible for your own investment decisions. This article is presented subject to our full disclaimer found on the QVM site available here.