“However, when one looks to Europe the major stock indices are not nearly as representative of the economy but are more reflective of the largest companies that domicile in that country. The German DAX index is a perfect example of this, in that almost all companies in that index are global in nature with some selling less than 10% of their products in Germany. Germany’s Export to GDP ratio, for example, is currently about 47%, and with the index driven largely by multinational companies it should not be a surprise that one of the key drivers of this index are German exports, and as a consequence the value of the Euro to it trading market basket of currencies is vitally important to this index’s overall performance,” said SIS President Phillip Miller in a recent research note. [Big Inflows to Germany ETFs]

The iShares MSCI Spain Capped ETF (NYSEArca: EWP) has a correlation of over 0.99 to the benchmark IBEX 35, according to SIS data.

ETF Correlations

Table Courtesy: Phil Miller, Strategic International Securities