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, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Which means for our asset as example:- Compared with the benchmark GLD (48.3%) in the period of the last 5 years, the total return of 40.6% of Leveraged Gold-Currency Strategy is smaller, thus worse.
- During the last 3 years, the total return is 13%, which is lower, thus worse than the value of 41.2% from the benchmark.

'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.'

Which means for our asset as example:- Compared with the benchmark GLD (8.2%) in the period of the last 5 years, the annual return (CAGR) of 7.1% of Leveraged Gold-Currency Strategy is lower, thus worse.
- Compared with GLD (12.2%) in the period of the last 3 years, the annual return (CAGR) of 4.2% is lower, thus worse.

'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:- Looking at the 30 days standard deviation of 9.6% in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively smaller, thus better in comparison to the benchmark GLD (13.4%)
- Compared with GLD (12.8%) in the period of the last 3 years, the volatility of 8.6% is smaller, thus better.

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk in our definition is the semi-deviation, that is the standard deviation of all negative returns.'

Which means for our asset as example:- The downside risk over 5 years of Leveraged Gold-Currency Strategy is 6.4%, which is lower, thus better compared to the benchmark GLD (9.1%) in the same period.
- During the last 3 years, the downside volatility is 6.1%, which is lower, thus better than the value of 8.7% from the benchmark.

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Which means for our asset as example:- Compared with the benchmark GLD (0.42) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.48 of Leveraged Gold-Currency Strategy is higher, thus better.
- During the last 3 years, the ratio of return and volatility (Sharpe) is 0.19, which is smaller, thus worse than the value of 0.76 from the benchmark.

'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.'

Applying this definition to our asset in some examples:- The ratio of annual return and downside deviation over 5 years of Leveraged Gold-Currency Strategy is 0.71, which is greater, thus better compared to the benchmark GLD (0.63) in the same period.
- Compared with GLD (1.12) in the period of the last 3 years, the excess return divided by the downside deviation of 0.27 is smaller, thus worse.

'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.'

Which means for our asset as example:- The Ulcer Index over 5 years of Leveraged Gold-Currency Strategy is 3.14 , which is lower, thus better compared to the benchmark GLD (7.02 ) in the same period.
- Looking at Downside risk index in of 3.41 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (5.55 ).

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Which means for our asset as example:- Compared with the benchmark GLD (-17.8 days) in the period of the last 5 years, the maximum DrawDown of -9.5 days of Leveraged Gold-Currency Strategy is higher, thus better.
- Looking at maximum DrawDown in of -9.5 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to GLD (-13.8 days).

'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.'

Which means for our asset as example:- The maximum days under water over 5 years of Leveraged Gold-Currency Strategy is 181 days, which is lower, thus better compared to the benchmark GLD (741 days) in the same period.
- Compared with GLD (352 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 181 days is lower, thus better.

'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.'

Applying this definition to our asset in some examples:- Looking at the average days below previous high of 42 days in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively lower, thus better in comparison to the benchmark GLD (239 days)
- Looking at average time in days below previous high water mark in of 53 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to GLD (102 days).

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.