|Quite a Test |
The financial sector ETF pair trade survived the market's meltdown
The concept stands up (so far, anyway) in other sectors, such as the utility sector. Take a look at the pairing of the WisdomTree International Utilities Fund ( DBU) and the ProShares UltraShort Utilities Fund ( SDP) during the same time frame and investment size:
|Utilitarian Pairing |
This combination would've worked well, too
- It delivers yield. The long holding pays a dividend and the inverse fund pays interest because it owns Treasuries and futures contracts.
- Two products correlate properly to create the effect. For example, one sector that might seem like an obvious candidate is telecom, but ProShares doesn't have an inverse telecom fund.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider WisdomTree International Financial Sector Fund, ProShares UltraShort Financials Fund, WisdomTree International Utilities Fund, ProShares UltraShort Utilities Fund and WisdomTree High-Yielding Equity ETF to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.