Additionally, policy uncertainty, notably from China and Japan, which make up 40% of global demand, could put pressure on the solar photovoltaic industry. For instance, observers are concerned that Chinese demand could weaken this year if the government decides to cap solar farm installations.

Both the Guggenheim TAN ETF and Market Vectors KWT ETF track global solar industry names, but the two funds have slightly different compositions. For instance, TAN has a heavier emphasis on Chinese stocks, with China at 36.9% of the overall portfolio and Hong Kong at 12.3%, whereas KWT weights China at 24.7% and holds U.S. solar stocks as its highest allocation at 35.0%.

As policy speculators will trade on Chinese solar stocks, TAN could experience greater volatility, with its larger weighting toward China.

For more information on the solar sector, visit our solar category.