Description

This strategy selects the top three performers from our core strategies, based on the most recent 6 month performance, and allocates one third to each of them.

Note that very often the strategy will invest in the more aggressive of our strategies, which might not be suitable for all investors. You can create your version of this strategy with our Portfolio Builder. Simply select the top 2, 3, or 4 strategies and assign equal weights to each or adjust your allocations for your risk level. You will need to manually review and update the top performers periodically.

Methodology & Assets

All of our current strategies are included in the algorithm.

Statistics (YTD)

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

TotalReturn:

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (120.1%) in the period of the last 5 years, the total return, or performance of 142.9% of Top 3 Strategies is higher, thus better.
  • Compared with SPY (65.1%) in the period of the last 3 years, the total return, or increase in value of 46% is smaller, thus worse.

CAGR:

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Which means for our asset as example:
  • The annual performance (CAGR) over 5 years of Top 3 Strategies is 19.5%, which is greater, thus better compared to the benchmark SPY (17.1%) in the same period.
  • During the last 3 years, the annual performance (CAGR) is 13.5%, which is lower, thus worse than the value of 18.3% from the benchmark.

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 10.1% in the last 5 years of Top 3 Strategies, we see it is relatively lower, thus better in comparison to the benchmark SPY (17.6%)
  • During the last 3 years, the historical 30 days volatility is 8.8%, which is smaller, thus better than the value of 17.5% from the benchmark.

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:
  • The downside risk over 5 years of Top 3 Strategies is 6.8%, which is smaller, thus better compared to the benchmark SPY (12.1%) in the same period.
  • During the last 3 years, the downside volatility is 5.8%, which is lower, thus better than the value of 11.6% from the benchmark.

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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (0.83) in the period of the last 5 years, the Sharpe Ratio of 1.69 of Top 3 Strategies is higher, thus better.
  • Looking at risk / return profile (Sharpe) in of 1.25 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.9).

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.'

Applying this definition to our asset in some examples:
  • The excess return divided by the downside deviation over 5 years of Top 3 Strategies is 2.49, which is larger, thus better compared to the benchmark SPY (1.21) in the same period.
  • During the last 3 years, the downside risk / excess return profile is 1.89, which is higher, thus better than the value of 1.36 from the benchmark.

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.'

Using this definition on our asset we see for example:
  • The Downside risk index over 5 years of Top 3 Strategies is 3.95 , which is lower, thus better compared to the benchmark SPY (8.48 ) in the same period.
  • Looking at Downside risk index in of 2.79 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (5.31 ).

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.'

Using this definition on our asset we see for example:
  • The maximum reduction from previous high over 5 years of Top 3 Strategies is -11 days, which is larger, thus better compared to the benchmark SPY (-24.5 days) in the same period.
  • During the last 3 years, the maximum reduction from previous high is -7.6 days, which is larger, thus better than the value of -18.8 days from the benchmark.

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 SPY (488 days) in the period of the last 5 years, the maximum days under water of 370 days of Top 3 Strategies is lower, thus better.
  • During the last 3 years, the maximum days below previous high is 205 days, which is larger, thus worse than the value of 199 days from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Looking at the average days under water of 77 days in the last 5 years of Top 3 Strategies, we see it is relatively lower, thus better in comparison to the benchmark SPY (120 days)
  • Compared with SPY (47 days) in the period of the last 3 years, the average days below previous high of 43 days is smaller, thus better.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

Allocations

Returns (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of Top 3 Strategies are hypothetical and do not account for slippage, fees or taxes.
  • Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.