Description

IMPORTANT: This strategy may use a leveraged GLD position which may cause the total allocation of the strategy to exceed 100%. See more information in this article.

The 3X Universal Investment Strategy (UISx3) is a leveraged version of our core Universal Investment Strategy (UIS), an evolved, intelligent version of the classic 60/40 equity/bond portfolio that can adapt to current conditions, shifting portfolio weight away from stocks in difficult markets and adding weight to equity in bull runs.

The 3x leveraged version of the strategy employs SPXL and TMF, which are the leveraged versions of the S&P 500 ETF, the Treasury 20+ year ETF. Since there is currently no leveraged gold ETF the strategy uses a triple position in GLD. Unlike the base UIS, the leveraged version only uses TMF and GLD to hedge SPXL exposure.

The UISx3 is appropriate for investors who are comfortable taking on higher risks in exchange for the potential for of higher returns. Because leveraged ETFs are used, we recommend allocating no more than 15% of your total portfolio to this strategy.

Methodology & Assets
  • SPXL - Direxion Daily S&P 500 Bull 3X Shares ETF
  • TMF - Direxion Daily 30-Year Treasury Bull 3x Shares ETF
  • GLD - SPDR Gold Trust

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 (81.5%) in the period of the last 5 years, the total return of 170.2% of Universal Investment Strategy 3x Leverage is larger, thus better.
  • Compared with SPY (48.1%) in the period of the last 3 years, the total return of 83.9% is greater, thus better.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (12.7%) in the period of the last 5 years, the annual return (CAGR) of 22% of Universal Investment Strategy 3x Leverage is greater, thus better.
  • Looking at annual performance (CAGR) in of 22.5% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (14%).

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:
  • Looking at the historical 30 days volatility of 24.5% in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively greater, thus worse in comparison to the benchmark SPY (20.5%)
  • Looking at historical 30 days volatility in of 28.2% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (23.8%).

DownVol:

'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 volatility over 5 years of Universal Investment Strategy 3x Leverage is 17.6%, which is larger, thus worse compared to the benchmark SPY (15%) in the same period.
  • Compared with SPY (17.3%) in the period of the last 3 years, the downside risk of 20.5% is greater, thus worse.

Sharpe:

'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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (0.5) in the period of the last 5 years, the Sharpe Ratio of 0.8 of Universal Investment Strategy 3x Leverage is larger, thus better.
  • During the last 3 years, the risk / return profile (Sharpe) is 0.71, which is higher, thus better than the value of 0.48 from the benchmark.

Sortino:

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Using this definition on our asset we see for example:
  • Looking at the excess return divided by the downside deviation of 1.11 in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.68)
  • During the last 3 years, the excess return divided by the downside deviation is 0.98, which is larger, thus better than the value of 0.66 from the benchmark.

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 Downside risk index over 5 years of Universal Investment Strategy 3x Leverage is 8.22 , which is greater, thus worse compared to the benchmark SPY (7.13 ) in the same period.
  • During the last 3 years, the Ulcer Ratio is 9.02 , which is larger, thus worse than the value of 8.25 from the benchmark.

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 drop from peak to valley over 5 years of Universal Investment Strategy 3x Leverage is -31.3 days, which is larger, thus better compared to the benchmark SPY (-33.7 days) in the same period.
  • During the last 3 years, the maximum DrawDown is -31.3 days, which is higher, thus better than the value of -33.7 days from the benchmark.

MaxDuration:

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Max Drawdown Duration is the worst (the maximum/longest) amount of time an investment has seen between peaks (equity highs). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Applying this definition to our asset in some examples:
  • Looking at the maximum time in days below previous high water mark of 228 days in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively higher, thus worse in comparison to the benchmark SPY (150 days)
  • Compared with SPY (150 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 167 days is greater, thus worse.

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.'

Applying this definition to our asset in some examples:
  • Looking at the average days below previous high of 55 days in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively higher, thus worse in comparison to the benchmark SPY (41 days)
  • Looking at average time in days below previous high water mark in of 45 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (36 days).

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 Universal Investment Strategy 3x Leverage 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.