The Non-Japan Asia Equity ETF (AAXJ) trades closely with the MSCI China ETF (MCHI). Over the past three years, the two ETF’s have returned 39% and 38%, respectively, and tracked with a 93% r-squared from 2018 to date.

There is considerable speculation that Chinese manufacturers will respond to American tariffs by shifting production to Southeast Asia, to the benefit of those economies.

China vs NJ Asia ETF

The biggest difference between AAXJ and MCHI is in risk. The implied volatility of options on AAXJ is consistently lower than MCHI, reflecting greater diversification. This lower risk does not appear to come at the expense of lower returns, which makes AAXJ a better choice.