Exploring Long-Short Strategies Using Paired Leveraged/Inverse ETFs

[Mark Vincent]

Has anyone experimented with creating individual long-short strategies for various asset classes using paired leveraged and inverse ETFs, then combining them into a diversified multi-strategy portfolio?
With the proliferation of inverse (and often leveraged) ETFs across many asset classes, it’s now easier to implement synthetic long-short exposure without direct shorting. For example, a long-short Japanese Yen strategy can be constructed using YCL (ProShares Ultra Yen, +2x long USD/JPY inverse, i.e., bullish on Yen) and YCS (ProShares UltraShort Yen, -2x). In backtests, this paired approach often delivers higher returns and better Sharpe ratios than holding either ETF alone, thanks to volatility harvesting and reduced directional risk.
In my testing, this long-short pairing improved performance across most asset classes I’ve tried, with the exceptions being Oil and S&P 500.

Asset classes tested:

– Gold
– Treasuries
– S&P 500
– Magnificent 7 (MAG7) stocks
– Japanese Yen
– Euro
– Bitcoin
– Oil

Notes on specific cases:

The pure S&P 500 long-short pair underperformed in my tests.
A stronger alternative for equity exposure is incorporating uncorrelated, trend-following ETFs like DBMF (managed futures), CTA (CTA strategy), or RSST (leveraged risk parity/multi-strategy). However, these have shorter track records, so future performance is uncertain and may be impacted by changing market regimes.

Overall insight:
Allocating across multiple such long-short pairs, and further combining them with uncorrelated strategies (e.g., managed futures or your own custom ones), tends to yield superior risk-adjusted returns—higher Sharpe ratios, lower drawdowns, and more consistent performance.
I’d love suggestions for additional asset class pairs or combinations you’ve found effective!

Cheers,
Mark V.

[Author]

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