The Global X FTSE Greece 20 ETF (NYSEArca: GREK) is off 3% to start 2015 and with anxiety running high that Greece is still a candidate for departure from the Eurozone, global equity market volatility and investors’ skittishness is on the rise.
With Greek elections slated for Jan. 25, global investors are understandably nervous about what the Eurozone will look like in the future. While Moody’s believes Greece’s Eurozone departure probability is not as high today as it was in 2012, there are still negative implications with such an event for fellow Eurozone nations.
Investors can mitigate Greek volatility with a familiar source: U.S.-focused low volatility ETFs, which outperformed traditional benchmarks in 2014. That group includes the PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV). [A Familiar ETF Could Lead Again in 2015]
“The relative performance of the S&P 500 Low Volatility Index during the Greek crisis in 2011 and 2012 offers insight into risk mitigation,” according to a recent note by PowerShares. [Using Low Volatility to Weather Eurozone Volatility]
A favored measuring stick for gauging Eurozone volatility is 10-year government bond yields, but combining that with how SPLV’s underlying index performed against the S&P 500 during periods of elevated Eurozone stress proves instructive for investors.