Description

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.

Statistics (YTD)

What do these metrics mean? [Read More] [Hide]

TotalReturn:

'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.'

Which means for our asset as example:
  • The total return, or performance over 5 years of Leveraged Gold-Currency Strategy is 35.3%, which is lower, thus worse compared to the benchmark GLD (37%) in the same period.
  • Compared with GLD (42.3%) in the period of the last 3 years, the total return, or increase in value of 17.9% is lower, thus worse.

CAGR:

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Applying this definition to our asset in some examples:
  • Looking at the annual performance (CAGR) of 6.2% in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively smaller, thus worse in comparison to the benchmark GLD (6.5%)
  • During the last 3 years, the annual performance (CAGR) is 5.7%, which is lower, thus worse than the value of 12.5% from the benchmark.

Volatility:

'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 (13.5%) in the period of the last 5 years, the volatility of 8.7% of Leveraged Gold-Currency Strategy is lower, thus better.
  • Looking at 30 days standard deviation in of 9.4% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (15.2%).

DownVol:

'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:
  • Compared with the benchmark GLD (9.7%) in the period of the last 5 years, the downside volatility of 6.1% of Leveraged Gold-Currency Strategy is smaller, thus better.
  • Looking at downside deviation in of 6.8% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (10.9%).

Sharpe:

'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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark GLD (0.3) in the period of the last 5 years, the risk / return profile (Sharpe) of 0.43 of Leveraged Gold-Currency Strategy is higher, thus better.
  • During the last 3 years, the risk / return profile (Sharpe) is 0.34, which is lower, thus worse than the value of 0.66 from the benchmark.

Sortino:

'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.'

Using this definition on our asset we see for example:
  • Looking at the excess return divided by the downside deviation of 0.61 in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively greater, thus better in comparison to the benchmark GLD (0.41)
  • Compared with GLD (0.92) in the period of the last 3 years, the ratio of annual return and downside deviation of 0.47 is smaller, thus worse.

Ulcer:

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Applying this definition to our asset in some examples:
  • The Ulcer Index over 5 years of Leveraged Gold-Currency Strategy is 3.63 , which is smaller, thus better compared to the benchmark GLD (7.72 ) in the same period.
  • Looking at Ulcer Ratio in of 3.7 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (7.93 ).

MaxDD:

'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.'

Applying this definition to our asset in some examples:
  • The maximum reduction from previous high over 5 years of Leveraged Gold-Currency Strategy is -9.7 days, which is greater, thus better compared to the benchmark GLD (-18.8 days) in the same period.
  • Compared with GLD (-18.8 days) in the period of the last 3 years, the maximum drop from peak to valley of -9.7 days is greater, thus better.

MaxDuration:

'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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark GLD (352 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 181 days of Leveraged Gold-Currency Strategy is smaller, thus better.
  • Looking at maximum time in days below previous high water mark in of 162 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (302 days).

AveDuration:

'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 (116 days) in the period of the last 5 years, the average days below previous high of 51 days of Leveraged Gold-Currency Strategy is smaller, thus better.
  • Compared with GLD (81 days) in the period of the last 3 years, the average time in days below previous high water mark of 49 days is lower, thus better.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations
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Allocations

Returns (%)

  • 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.