Yesterday I mentioned a simple way to hedge a portfolio using either the profunds or proshares. Today I will offer a sample portfolio that demonstrates a simple hedged portfolio that has yielded an impressive 15.1 percent return year to date. The portfolio below is NOT A RECOMMENDATION. It is simply a backtest demonstration of a 4 way combination of proshares ETF’s and what the strategy would have returned this year. This particular sample portfolio is comprised of the following:

  • Proshares Ultra Technology ETF (symbol ROM) - bullish on technology
  • Proshares Ultra Oil and Gas ETF (symbol DIG) - bullish on energy
  • Proshares Ultrashort S&P 500 (symbol SDS) - bearish on the market in general, to hedge other positions
  • Proshares Ultrashort Financials (symbol SKF) - bearish on financials, also used to hedge other bullish positions

If you decide to use proshares to either enhance or hedge your portfolio, you will have to determine the best combination that suits your own investment style and bias. The results below are just a quick demonstration of their usefullness. The strategy assumes purchasing 100 shares of each of the 4 proshares ETF’s on January 2, for a total outlay of $34,249. As of today, such a portfolio would be valued at $39,418, for a cumulative YTD return of 15.1%. This compares very favorably to the current S&P YTD return, which at last glance was DOWN 11.2% YTD.


Details of this simple backtest are below. You can try your own combinations to see how this combination and hedged strategy would have worked for you.

Date ROM DIG SDS SKF Total
Balance		 YTD
Return
01/02/08 7,744 10,608 5,478 10,419 34,249 0.0%
01/11/08 6,587 9,558 5,839 11,026 33,010 -3.6%
01/18/08 6,090 7,998 6,580 12,927 33,595 -1.9%
01/25/08 5,884 7,843 6,473 10,968 31,168 -9.0%
02/01/08 6,220 8,308 5,874 9,213 29,615 -13.5%
02/08/08 5,556 7,867 6,437 10,868 30,728 -10.3%
02/15/08 5,646 8,659 6,263 11,070 31,638 -7.6%
02/22/08 5,641 9,101 6,182 10,858 31,782 -7.2%
02/29/08 5,574 9,348 6,407 10,816 32,145 -6.1%
03/07/08 5,397 8,765 6,780 13,295 34,237 0.0%
03/14/08 5,425 9,054 6,764 13,175 34,418 0.5%
03/20/08 5,607 8,214 6,400 10,635 30,856 -9.9%
03/28/08 5,484 8,776 6,433 11,925 32,618 -4.8%
04/04/08 5,937 9,681 5,936 10,338 31,892 -6.9%
04/11/08 5,605 9,691 6,238 11,316 32,850 -4.1%
04/18/08 6,307 11,247 5,796 10,263 33,613 -1.9%
04/25/08 6,396 11,044 5,696 9,759 32,895 -4.0%
05/02/08 6,725 10,547 5,539 9,273 32,084 -6.3%
05/09/08 6,624 11,315 5,748 10,359 34,046 -0.6%
05/16/08 7,186 12,256 5,455 10,088 34,985 2.1%
05/23/08 6,633 11,695 5,877 11,291 35,496 3.6%
05/30/08 7,097 11,500 5,640 11,030 35,267 3.0%
06/06/08 6,804 11,600 5,966 12,185 36,555 6.7%
06/13/08 6,737 11,547 5,987 12,269 36,540 6.7%
06/20/08 6,403 12,270 6,323 13,387 38,383 12.1%
06/27/08 5,913 11,730 6,702 15,073 39,418 15.1%