Diversification with ETFs

The following chart shows the 40 ETFs with the highest trading volumes and their correlations with the FTSE 100 Index. The ETFs are ranked by correlation; the ETFs at the top of the chart have the closest correlation with the FTSE 100 Index.

Correlation of the 40 most heavily traded ETFs with the FTSE 100 Index_bNotes:

  1. The iShares World, S&P500 and Emerging Markets ETFs are grouped at the top of the table; so don’t expect much diversification away from the FTSE 100 Index by investing in these.
  2. For proper diversification away from FTSE 100 Index investors need to look at the bond ETFs at the bottom of the table.

 

 

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