Wednesday, September 1, 2010

Time to sell Australia

Back in late May I suggested that a cheap way to buy Canadian-like equity exposure would be to buy the Australian market, as both markets and economies are fairly similar. The chart below shows the relative returns of the iShares Australia ETF (EWA) relative to iShares Canada (EWC) and what the pair has done since the call:

Since my post, the Australian market has beaten the Canadian market by about 8%. The maximum outperformance of this trade was about 11%. The pair trade has reached parity. It's time to take profits.