The comparison of HEDJ and VGK,although not apples-to-apples, underscores the advantages of currency hedging in a strong dollar/weak euro environment. Over the past year, HEDJ has displayed an almost perfect inverse correlation to the CurrencyShares Euro Currency Trust (NYSEArca: FXE), with the former rising 17.7% as the latter slid 17%. Conversely, VGK, which is not a dedicated Eurozone ETF as HEDJ is, fell nearly 3% over the same 12-month period. [Hedged Europe ETF Tops $10B in AUM]
As a dedicated Eurozone play, HEDJ allocates almost 51% of its combined weight to Germany and France, the region’s two largest economies. Conversely, VGK allocates over 46% of its weight to the U.K. and Switzerland, which are not Eurozone members.
WisdomTree Europe Hedged Equity Fund
Tom Lydon’s clients own shares of HEDJ and HYG.