ProShares has offered a variety of "Ultra" and "UltraShort" sector ETFs for more than a year now.  These funds are designed to track twice the return of the underlying index, and each corresponding long fund is created to match its corresponding short. 

There is no doubt that these ProShares offerings have been the subject of a great deal of interest.  They promise the rewards of leveraged sector returns without the headache of margin or portfolio construction, allowing profitable bets with less capital and less risk.  This might not come for free, however, and many have investigated how closely these funds track their double-return target in terms of price.  For more on that topic, I suggest this article directly from ProShares.

Instead of asking whether these funds track twice their underlying index, however, I've decided to investigate whether each pair of funds behaves as expected.  That is, given two well-constructed  index portfolios, the sum of the long fund's return and the short fund's return should equal zero.  Though the behavior of the underlying derivatives might be expected to introduce some tracking error, we should  expect to see only relatively small differences relating to the difference between price and NAV.

The following chart demonstrates the cumulative return difference between the long and short funds.

The chart demonstrates that this is far from the case.  In fact, nearly half of the sectors have seen over 20% deficits in this balance since June of last year.

Looking for explanations outside of portfolio construction leads to a believable alternative.  Charting dollar volume differences shows that almost every single sector had greater dollar volumes on the short side.  In some sectors like Materials and Real Estate, the difference in dollar flow over the past year has hit tens of billions.  It seems likely that these funds are much more valuable as insurance for the down-side than as single-sector long bets.  In other words, if investor are much more likely to bid on and bid up an UltraShort Sector insurance contract, imbalances such as these might be expected.