Frontier Stock Market Correlations for 2017


Emerging and frontier markets have had a great run so far in 2017, out pacing US markets for the first time in almost a decade. With everything going up this year, how have correlations changed for frontier stock markets? We took a look at correlations for 2017, check out the results from 2016, 2015, and 2014 as well.


We looked at the monthly correlation of markets over the past 48 months. We used end of month closes of each market’s major indices, and calculated the correlation of their returns to produce these tables. As always, we’ve used Excel online so you can download the results if you wish.

Our correlation coefficient calculations show how closely two indices are linked. A correlation coefficient of 1.00 is the highest and shows two indices that move exactly the same. A correlation coefficient of 0.00 represents no correlation between the two indices, while a negative correlation coefficient represents two indices that move in opposite directions. When constructing a portfolio of different markets, it is advantageous to find markets with low correlations to each other in order to benefit from diversification.


  • Global correlations are generally lower in 2017 compared to 2016, but changing from a 36 month to 48 month correlation may have lessened the impact of recent moves
  • Despite mostly bullish moves globally, frontier markets remain very uncorrelated to US developed markets with everywhere except Asia at under 0.200 correlation
  • These correlations mean that frontier markets can help almost any portfolio with diversification benefits

Developing and Emerging Market Correlations

  • It is useful to look at developing and emerging market correlations to establish a baseline to compare frontier markets with
  • Russia is the main outlier here and correlates with other DM and EM markets at similar levels to other frontier markets
  • China is the second least correlated market to the others
  • Hong Kong is well correlated to both DM markets and to the MSCI EM and FM indices

African Frontier Stock Market Correlation

  • Africa’s stock markets are very lowly correlated even to other African markets, meaning that an African focused portfolio could actually be very diversified without straying from the continent
  • Smaller countries are particularly uncorrelated with Botswana and Rwanda not following most other markets

Central & Latin American Frontier Stock Market Correlation

  • Wealther countries typically have stock markets that are more correlated with developed markets, so Argentina, Chile, and Colombia are all relatively correlated with the rest of the world
  • Peru is a noticeable exception, with negative correlations to most other countries in Latin America

European & Central Asian Frontier Stock Market Correlation

  • Europe and Central Asia is a mixed bag; Romania and Slovenia are relatively well correlated to developed markets, but Malta, Slovakia, and Bosnia are all almost uncorrelated with the rest of the region
  • Given that even Russia is less correlated to the global markets, most countries in Central Asia also have low correlations to developed markets with Kazakhstan the main exception

Middle Eastern Frontier Stock Market Correlation

  • A large contrast is seen between countries with stocks in the MSCI FM index (which is dominated by the Middle East) and more frontier markets
  • Egypt, Kuwait, Oman, and Saudi Arabia are all above 0.300 correlation to developed markets

Asia Frontier Stock Market Correlation

  • You can really see the difference between frontier markets that are further along but just outside of the main emerging markets (eg. Pakistan, Philippines, Vietnam) and frontier markets in the early stage of the growth cycle (eg. Cambodia and Laos)
  • Cambodia and Laos are almost island-like in their lack of correlation to other markets

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