Rational investors need to weigh risk and return. In previous analyses of individual stocks, we found that the utility sector was the most resilient in the recent market downturn, and that water utilities were the safest utility industry.
But which funds dropped the most? Which dropped the least? Where was there the most risk among exchange traded funds (ETFs), exchange traded notes (ETNs), and closed-end funds (CEFs)?
To answer this question, 1528 different ETFs, ETNs, and closed-end funds were screened and sorted based on their performances over week-long downturn that lasted through August 9th, 2011. Over the course of this week, the S&P500 index dropped over 13.3% while the mean drop for a broader sample of 4541 equities was 10.1%,* providing an opportunity to observe fund differences during extreme market drops.
Below are the twenty funds with the worst returns during the down week:
Ticker | Fund | Weekly Gain (Loss) |
Direxion Daily Russia Bull 3x S | -45.99% | |
Direxion Daily Energy Bull 3X Shares | -39.25% | |
Direxion Daily Small Cap Bull 3X Shares | -36.41% | |
Direxion Daily China Bull 3x Sh | -35.26% | |
MWJ | Direxion Daily Mid Cap Bull 3X Shares | -33.77% |
iPath Long Extended Russell 2000 TR ETN | -31.98% | |
Direxion Daily Latin America Bull 3X Shs | -31.29% | |
VelocityShares Daily Inverse VIX ST ETN | -31.19% | |
Direxion Daily Semicondct Bull 3X Shares | -30.26% | |
FactorShares 2X: S&P500 Bull/TBond Bear | -29.95% | |
ProShares UltraPro Russell2000 | -29.67% | |
Direxion Daily Emrg Mkts Bull 3X Shares | -29.52% | |
ProShares UltraPro MidCap400 | -29.22% | |
Direxion Daily Natural Gas Rela | -29.04% | |
Direxion Daily Basic Materials | -28.25% | |
Direxion Daily Financial Bull 3X Shares | -27.62% | |
ProShares Ultra Oil & Gas | -27.36% | |
iPath Long Extended Russell 1000 TR ETN | -26.77% | |
Direxion Daily Real Estate Bull 3X Shrs | -26.70% | |
ProShares Ultra Russell2000 Value | -26.07% |
Almost like a mirror image of the underperformers, the best performing funds are listed below:
Ticker | Fund | Weekly Gain (Loss) |
C-Tracks Citi Volatility Index TR ETN | 68.22% | |
Direxion Daily Russia Bear 3x S | 57.83% | |
VelocityShares Daily 2x VIX ST ETN | 56.59% | |
iPath Short Extended Russell 1000 TR ETN | 47.12% | |
ProShares UltraPro Short Russell2000 | 42.07% | |
iPath Short Extended Russell 2000 TR ETN | 37.97% | |
Direxion Daily China Bear 3x Sh | 36.72% | |
Direxion Daily Emrg Mkts Bear 3X Shares | 36.67% | |
Direxion Daily Small Cap Bear 3X Shares | 34.22% | |
Direxion Daily Energy Bear 3X Shares | 33.47% | |
Direxion Daily Natural Gas Rela | 32.47% | |
VIXY] | ProShares VIX Short-Term Futures ETF | 30.71% |
VelocityShares Long VIX Short Term ETN | 30.64% | |
iPath S&P 500 VIX Short-Term Futures ETN | 30.41% | |
iPath Short Extended S&P 500 TR ETN | 29.87% | |
ProShares UltraShort DJ-UBS Crude Oil | 28.76% | |
Direxion Daily Latin America Bear 3X Shs | 26.97% | |
ProShares UltraPro Short QQQ | 25.45% | |
ProShares UltraShort MSCI Brazil | 25.30% | |
ProShares UltraShort Russell1000 Value | 24.57% |
These lists show that levered funds were the most extreme performers. In addition, many of the levered funds and their inverses would have yielded a positive return if held in combination. For example, holding RUSS (57.83%) and RUSL (-45.99%) would have yielded a positive overall return. This result shows that these funds behave like options, and that holding both the levered and inverse levered fund is the equivalent of a straddle on the underlying asset.
*Stocks with volumes under 5000 were excluded from the screen, since low liquidity makes them hard to trade. ETFs and other funds were also excluded.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
