The Leveraged Gold-Currency Strategy takes advantage of the historically negative correlation between gold and the U.S. dollar. It switches between the two assets based on their recent risk adjusted performance enabling the strategy to provide protection against severe gold corrections due to dollar strength. It is an excellent addition to existing equity or bond portfolios as it holds very little correlation to either.

This version of the strategy uses inverse leveraged ETFs to generate higher returns, but some retirement accounts are restricted from trading these ETFs. GLD-UUP provides an alternate form of the strategy without leveraged ETFs which also lowers the overall return and volatility.

'Total return is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Using this definition on our asset we see for example:- The total return, or increase in value over 5 years of Leveraged Gold-Currency Strategy is 101.3%, which is greater, thus better compared to the benchmark GLD (45.6%) in the same period.
- Compared with GLD (30.9%) in the period of the last 3 years, the total return, or increase in value of 44.6% is larger, thus better.

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Using this definition on our asset we see for example:- The compounded annual growth rate (CAGR) over 5 years of Leveraged Gold-Currency Strategy is 15%, which is higher, thus better compared to the benchmark GLD (7.8%) in the same period.
- During the last 3 years, the compounded annual growth rate (CAGR) is 13.1%, which is higher, thus better than the value of 9.4% from the benchmark.

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Using this definition on our asset we see for example:- Compared with the benchmark GLD (14.6%) in the period of the last 5 years, the 30 days standard deviation of 10.7% of Leveraged Gold-Currency Strategy is smaller, thus better.
- During the last 3 years, the volatility is 11.4%, which is lower, thus better than the value of 16% from the benchmark.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Which means for our asset as example:- The downside risk over 5 years of Leveraged Gold-Currency Strategy is 7.3%, which is smaller, thus better compared to the benchmark GLD (10.3%) in the same period.
- Looking at downside deviation in of 8.2% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to GLD (11.3%).

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Applying this definition to our asset in some examples:- Looking at the ratio of return and volatility (Sharpe) of 1.17 in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively higher, thus better in comparison to the benchmark GLD (0.36)
- Compared with GLD (0.43) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 0.92 is larger, thus better.

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Which means for our asset as example:- Compared with the benchmark GLD (0.51) in the period of the last 5 years, the downside risk / excess return profile of 1.72 of Leveraged Gold-Currency Strategy is greater, thus better.
- Looking at ratio of annual return and downside deviation in of 1.29 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to GLD (0.61).

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Using this definition on our asset we see for example:- The Ulcer Index over 5 years of Leveraged Gold-Currency Strategy is 4.13 , which is lower, thus better compared to the benchmark GLD (10 ) in the same period.
- Compared with GLD (12 ) in the period of the last 3 years, the Ulcer Index of 5.11 is lower, thus better.

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Using this definition on our asset we see for example:- Looking at the maximum reduction from previous high of -11.3 days in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively larger, thus better in comparison to the benchmark GLD (-22 days)
- During the last 3 years, the maximum DrawDown is -11.3 days, which is higher, thus better than the value of -22 days from the benchmark.

'The Maximum Drawdown Duration is an extension of the Maximum Drawdown. However, this metric does not explain the drawdown in dollars or percentages, rather in days, weeks, or months. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Using this definition on our asset we see for example:- Compared with the benchmark GLD (660 days) in the period of the last 5 years, the maximum days below previous high of 297 days of Leveraged Gold-Currency Strategy is lower, thus better.
- During the last 3 years, the maximum days below previous high is 297 days, which is smaller, thus better than the value of 660 days from the benchmark.

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'

Which means for our asset as example:- Compared with the benchmark GLD (227 days) in the period of the last 5 years, the average days under water of 58 days of Leveraged Gold-Currency Strategy is smaller, thus better.
- During the last 3 years, the average time in days below previous high water mark is 80 days, which is lower, thus better than the value of 302 days from the benchmark.

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of Leveraged Gold-Currency Strategy are hypothetical, do not account for slippage, fees or taxes, and are based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.