Japan (EWJ) outperforms as Coronavirus cases are low (due to low testing), but country now on the verge of a massive virus outbreak, in line w/ EU & US.
Italy (EWI) lags DM, seen as new epicenter of Coronavirus. Country on lockdown, virus priced in (relative to Japan).
Italy also has sov debt & banking crisis overhang- but Japan also has massive sov debt & banking crisis, just not as widely publicized.
Banking/debt crisis aside, strictly from coming Coronavirus data reaction, RELATIVE pair trade:
Short EWJ (Japan) / Long EWI (Italy)
ETFs are FX hedged to mitigate some of USD vol interference.
Italy (EWI) lags DM, seen as new epicenter of Coronavirus. Country on lockdown, virus priced in (relative to Japan).
Italy also has sov debt & banking crisis overhang- but Japan also has massive sov debt & banking crisis, just not as widely publicized.
Banking/debt crisis aside, strictly from coming Coronavirus data reaction, RELATIVE pair trade:
Short EWJ (Japan) / Long EWI (Italy)
ETFs are FX hedged to mitigate some of USD vol interference.