Velocityshares 3X Long Natural Gas ETN (UGAZ)

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UGAZ Vs. GASL: Two Different Leveraged Gas ETFs
By Investopedia | August 12, 2015
Wow... that's a complicated one, but very interesting. Thanks!
I'll have to re-read this many times...
http://www.investopedia.com/articles/investing/081215/ugaz-vs-gasl-two-different-leveraged-gas-etfs.asp

The VelocityShares 3X Long Natural Gas ETN (NYSEArca: UGAZ) and the Direxion Daily Natural Gas Related Bull 3X ETF (NYSEArca: GASL) are leveraged ETFs that track natural gas indexes. The VelocityShares 3X Long Natural Gas ETN tracks the performance of the Standard & Poor's GSCI Natural Gas Index Excess Return, which is comprised of futures contracts. Conversely, the Direxion Daily Natural Gas Related Bull 3X ETF tracks the ISE Revere Natural Gas Index, which provides investors with exposure to the natural gas industry. As with all leveraged ETFs, these funds seek a return that is three times the daily return of their benchmark indexes. They should not be expected to provide three times the returns of these indexes' cumulative returns over one day.

Characteristics of UGAZ
As of June 29, 2015, based on trailing three-year data, the VelocityShares 3X Long Natural Gas ETN has an annualized market price return of -58.07%. UGAZ aims to provide investment results, before fees and expenses, that correspond to three times the daily performance of the S&P GSCI Natural Gas Index ER. This index is intended to reflect natural prices and consists of futures contracts on natural gas only. The levels of S&P GSCI Natural Gas Index are calculated using the methodology of the S&P GSCI Index. UGAZ provides a leveraged return through direct holdings of futures and rebalancing of the fund daily to reflect three times the notional value of the futures contracts.

As of July 24, 2015, the VelocityShares 3X Long Natural Gas ETN allocates 100% to NYM Natural Gas Futures contracts that expire in September 2015. Due to the active management and daily rebalancing of the fund, it has a relatively high expense ratio of 1.65%, while the category average is 0.99%.

Based on trailing three-year data, UGAZ has an alpha of -20.49, a beta of 2.38 and a Sharpe ratio of -0.43. When compared to the MSCI ACWI NR USD Index, UGAZ underperformed the index by an annualized 20.49%. UGAZ's beta of 2.38 indicates it theoretically experienced 238% more volatility than the MSCI ACWI NR USD Index. The Sharpe ratio indicates the fund was unable to provide adequate returns on a risk-adjusted basis.

Characteristics of GASL
Conversely, the Direxion Daily Natural Gas Related Bull 3X ETF seeks to provide investment results, before fees and expenses, that are three times the daily performance of the ISE Reverse Natural Gas Index. The ISE Revere Natural Gas Index is composed of natural gas companies whose majority of assets are located in North America. GASL offers traders and speculators opportunities to magnify their bullish outlook on the ISE Reverse Natural Gas Index by three times.

Unlike the VelocityShares 3X Long Natural Gas ETN, the Direxion Daily Natural Gas Related Bull 3X ETF has holdings that consist of both derivative contracts, such as swaps, and natural gas companies. For example, as of June 30, 2015, the top holdings of GASL are 25.24% ISE Reverse Natural Gas Index Swap; 2.27% Seventy Seven Energy Incorporated; 2.25% Matador Resources Company; 2.14% Noble Energy Incorporated; 2.13% Cabot Oil & Gas Corporation; 2.13% Stone Energy Corporation; 2.12% Statoil ASA; and 2.10% Apache Corporation. These holdings are 40.38% of the fund's total assets and must be rebalanced daily to reflect three times the returns of the index.

Contrary to UGAZ, based on trailing three-year data, GASL has an alpha of -116.92, a beta of 4.42 and a Sharpe ratio of -0.55. While UGAZ underperformed the MSCI ACWI NR USD Index by an annualized 20.49, GASL underperformed the index by an annualized 116.92%. GASL's beta of 4.42 indicates the fund is theoretically 442% as volatile as the MSCI ACWI NR USD Index. Therefore, if the MSCI ACWI NR USD Index has a 1% move, up or down, GASL is expected to have a 4.42% move, up or down. Its Sharpe ratio of -0.55 indicates GASL underperformed the risk-free rate of return.