Stock, Bond ETFs May Not Be Enough to Diversify Risk | Page 2 of 2 | ETF Trends

Nevertheless, Cameron points out that investors can focus on alternative strategies to help diversify away from traditional assets in a volatile environment. For instance, he points to market neutral long-short strategies.

ETF investors can gain consider the ProShares Large Cap Core Plus (NYSEArca: CSM), which overweights attractive stocks while taking a short position in unfavorable stocks. [ETF Spotlight: Long/Short Large-Caps]

There are also some funds that try to provide a market neutral investment strategy, including the Credit Suisse Market Neutral Equity ETN (NYSEArca: CSMN) and the QuantShares U.S. Market Neutral Momentum Fund (NYSEArca: MOM).

ProShares recently launched a couple long/short bond ETFs to help mitigate the effects of rising rates. The ProShares Investment Grade-Interest Rate Hedged ETF (BATS: IGHG) and the ProShares High Yield Interest Rate Hedged ETF (BATS: HYHG) are comprised of long positions in USD-denominated corporate bonds issued by U.S. and foreign companies and take short positions in U.S. Treasury notes. [Alternative ETFs Mitigate Rising Rates Risk]

WisdomTree also came out with 6 new ETFs for a rising rate environment. [WisdomTree Launches 6 ETFs for a Changing Rate Environment]

For more information on ETFs, visit our ETF 101 category.

Max Chen contributed to this article.