Each sector will hold 10 stocks for inclusion, with each stock exhibiting the strongest correlation of over performance compared to the increase in 10-year U.S. Treasury yields based on a weekly observation over the past three years. If there aren’t enough large-cap stocks that meet the requirement, then the index may include top ranked mid-cap stocks.
Related: 14 Hedged Bond ETFs for a Rising Rate Environment
Top holdings include E*Trade Financial Corp, Lincoln National Corp., Prudential Financial Inc, Fifth Third Bancorp and Zions Bancorp.
“Certain equity market sectors are more sensitive to interest rates than others and can rise or fall as rates change. There are also stocks within these rate-sensitive sectors that have a greater tendency to demonstrate positive or negative results as rates move than others. These different sensitivities to rates create an opportunity,” according to ProShares.
EQRR also comes with a 0.35% expense ratio, and its underlying index shows a dividend yield of 2.62%.
The Equities for Rising Rates ETF may complement ProShares’ line of fixed-income strategies for a rising rate environment, including the ProShares Investment Grade-Interest Rate Hedged ETF (BATS: IGHG) and ProShares High Yield Interest Rate Hedged ETF (BATS: HYHG). The two rate-hedged bond ETF strategies could outperform non-rate-hedged bond ETFs if interest rates rise.