Description

The Gold-Currency Strategy II 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 strategy is an update to the original GLD-USD strategy that uses inverse leveraged ETFs which are not permitted in some retirement accounts.

Statistics (YTD)

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

TotalReturn:

'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.'

Applying this definition to our asset in some examples:
  • The total return over 5 years of Gold-Currency Strategy II is 24.7%, which is smaller, thus worse compared to the benchmark GLD (33.7%) in the same period.
  • During the last 3 years, the total return, or increase in value is 21.7%, which is lower, thus worse than the value of 30.9% from the benchmark.

CAGR:

'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 (6%) in the period of the last 5 years, the annual performance (CAGR) of 4.5% of Gold-Currency Strategy II is smaller, thus worse.
  • Looking at annual return (CAGR) in of 6.8% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (9.4%).

Volatility:

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Which means for our asset as example:
  • Looking at the 30 days standard deviation of 9.6% in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (13.3%)
  • Looking at 30 days standard deviation in of 9.7% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (12.4%).

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%) in the period of the last 5 years, the downside risk of 6.4% of Gold-Currency Strategy II is lower, thus better.
  • Looking at downside deviation in of 6.6% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to GLD (8.4%).

Sharpe:

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Applying this definition to our asset in some examples:
  • Looking at the risk / return profile (Sharpe) of 0.21 in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus worse in comparison to the benchmark GLD (0.26)
  • Compared with GLD (0.56) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 0.44 is lower, thus worse.

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:
  • Compared with the benchmark GLD (0.39) in the period of the last 5 years, the excess return divided by the downside deviation of 0.31 of Gold-Currency Strategy II is lower, thus worse.
  • Looking at excess return divided by the downside deviation in of 0.65 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (0.82).

Ulcer:

'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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark GLD (7.46 ) in the period of the last 5 years, the Ulcer Ratio of 4.5 of Gold-Currency Strategy II is lower, thus better.
  • Looking at Ulcer Index in of 3.08 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (5.64 ).

MaxDD:

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Applying this definition to our asset in some examples:
  • The maximum reduction from previous high over 5 years of Gold-Currency Strategy II is -12.5 days, which is higher, thus better compared to the benchmark GLD (-17.8 days) in the same period.
  • Looking at maximum reduction from previous high in of -12.5 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to GLD (-13.8 days).

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.'

Using this definition on our asset we see for example:
  • Looking at the maximum days under water of 606 days in the last 5 years of Gold-Currency Strategy II, we see it is relatively smaller, thus better in comparison to the benchmark GLD (741 days)
  • Compared with GLD (352 days) in the period of the last 3 years, the maximum days below previous high of 299 days is lower, thus better.

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:
  • The average days below previous high over 5 years of Gold-Currency Strategy II is 186 days, which is lower, thus better compared to the benchmark GLD (245 days) in the same period.
  • During the last 3 years, the average days below previous high is 87 days, which is smaller, thus better than the value of 103 days from the benchmark.

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 Gold-Currency Strategy II 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.