To keep pace with the evolution of markets, our ongoing research often involves assessing the compatibility of new financial products with our VIX signals. As part of this process, we have identified opportunities to express our dashboard signals using a set of equity index products with high correlation to the VIX. In conjunction with our current stable of VIX ETPs, these index products have the potential to expand the opportunity set for Alpha Seeker while providing improved risk control, liquidity and diversification.
UPRO vs SVXY since Nov 2010
The chart at left demonstrates the tradeoffs of one of the products identified in our research. Relative to SVXY (the short VIX ETF currently used in Alpha Seeker), ProShares UltraPro S&P 500 (ticker UPRO) shows similar return potential and a much better risk profile, with the tradeoff of underperformance relative to SVXY during certain market environments. Using our VIX dashboard to define these environments, both products can be used when appropriate to produce an even more compelling profile for Alpha Seeker.
Going forward, we’re excited to begin using UPRO and similar positions opportunistically in Alpha Seeker portfolios, subject to the same signals and process that has carried the strategy so far over the past 7 years. As always, the strategy’s goal is to seek growth which is uncorrelated to stocks and bonds.