Commodities have been one of the most volatile investment categories in recent years. After the bull market in the first decade of the 21st century, the next five years produced abysmal returns in the sector. The Bloomberg Commodity Index fell 19.25% in 2011, 2.09% in 2012, 9.31% in 2013, 16.85% in 2014, and 23.67% in 2015. As of April 11, 2016, the index was higher by 1% year-to-date, but many question whether a rally is sustainable.

There are several ways investors can bet on a decline in commodity prices. One way is to sell short ETFs that invest in commodities. This strategy requires the trader to have a margin account with a brokerage firm. A short seller pays interest to a broker in order to borrow shares, and he also may have to buy back the position in the event of a short squeeze. Another way to profit from declining commodity prices is to purchase an inverse ETF. There are several short commodity ETFs from which to choose.

United States Short Oil Fund

United States Short Oil Fund (NYSEARCA: DNO) is a fund that was created on Sept. 24, 2009, by United States Commodity Funds LLC. The fund's investment objective is to have the daily percentage change of the per share net asset value (NAV) equal the inverse of the daily percentage change of the spot price of West Texas Intermediate (WTI) light oil. For example, if WTI falls 3% one day, then the fund's per share NAV would be expected to rise 3%. The fund seeks to achieve its returns by investing in short positions in oil futures contracts.

As of April 8, 2016, the fund generated three-year returns of 119.17% and five-year returns of 137.18%, both of which exceed the average short commodity fund's returns. The fund's expense ratio of 0.60% is the lowest in its group.

PowerShares DB Crude Oil Short ETN

PowerShares DB Crude Oil Short ETN (NYSEARCA: SZO) is a fund that was created on June 16, 2008, by Deutsche Bank AG. The fund seeks to track a short position, before expenses, on the Deutsche Bank Liquid Commodity index - Optimum Yield Oil Excess Return. The index uses a set of rules to invest in futures contracts on WTI. These investments are designed to track the spot price of crude oil.

As of April 8, 2016, the fund's one-, three- and five-year returns were among the highest in the short commodity fund category. The fund achieved one-year returns of 45.55%, three-year returns of 129.63%, and five-year returns of 155%. Remarkably, the fund generated its impressive returns with lower-than-average volatility compared to its peers. The fund's 50-day volatility of 52.37% and 200-day volatility of 45.98% were both lower than the average fund in the category. The fund's expense ratio of 0.75% was slightly higher than the category average of 0.73%.

PowerShares DB Commodity Short ETN

PowerShares DB Commodity Short ETN (NYSEARCA: DDP) is a fund that began trading on April 28, 2008, as a member of the Deutsche Bank AG fund family in the inverse commodities sector. The fund allows investors to establish short positions in a variety of commodities. Its objective is to mirror, after expenses, the inverse of the Deutsche Bank Liquid Commodity Total Return index. The index measures the market value of commodity futures contracts based on crude oil, heating oil, corn, wheat, gold and aluminum.

As of April 8, 2016, the fund generated one-year returns of 34.37%, three-year returns of 94.13%, and five-year returns of 106.6%, which ranked it in the middle of the group of short commodity funds. While the fund also experienced higher volatility and a higher beta than other funds in its category, it may be worth considering, since it is one of the only short commodity ETFs that offers broad diversification across several different commodities. Although many of these commodities have moved in tandem recently, they may not always do so in the future. DDP has an expense ratio of 0.73%.