Description

This is a very aggressive strategy that invests in the top performers across a selection of crypto, equity, treasury and precious metal assets with similar volatility characteristics. These asset classes are represented by Bitcoin, Ethereum, SPXL, TMF and AGQ. Twice each month, the strategy ranks these assets using our Modified Sharpe Ratio and invests 50% of the portfolio in each of the top two performers.

Due to the nature of crypto currency and leveraged ETFs, investors should be prepared for large swings up and down.

Here are some of the possible market scenarios this strategy is designed take advantage of:

  • Ethereum is performing well but Bitcoin is under-performing. The strategy can invest 50% in Ethereum and 50% in SPXL.
  • A prolonged crypto bear market. The strategy can shift to 50% in SPXL and 50% in TMF.
  • Cryptos are outperforming other asset classes. The strategy could invest fully in crypto assets by allocating 50% to Bitcoin and 50% to Ethereum.

Twice Monthly Rebalancing

The strategy rebalances on the 1st and 16th of each month which provides a balance between a very active daily or weekly rebalancing, that can cause whipsaws, and a monthly rebalancing that may be too slow considering how fast the crypto markets move. The twice-monthly frequency is simple to execute, avoids whipsaws but can still react to shifting market trends.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark BTC-USD (1114.2%) in the period of the last 5 years, the total return of 1264.8% of Crypto & Leveraged Top 2 Strategy is larger, thus better.
  • Looking at total return, or increase in value in of 6.6% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to BTC-USD (78.2%).

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:
  • Compared with the benchmark BTC-USD (65%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 68.9% of Crypto & Leveraged Top 2 Strategy is higher, thus better.
  • Compared with BTC-USD (21.4%) in the period of the last 3 years, the annual return (CAGR) of 2.2% is lower, thus worse.

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 volatility of 53.4% in the last 5 years of Crypto & Leveraged Top 2 Strategy, we see it is relatively smaller, thus better in comparison to the benchmark BTC-USD (61.5%)
  • Compared with BTC-USD (55.2%) in the period of the last 3 years, the historical 30 days volatility of 42.3% is lower, thus better.

DownVol:

'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.'

Using this definition on our asset we see for example:
  • Looking at the downside volatility of 34.4% in the last 5 years of Crypto & Leveraged Top 2 Strategy, we see it is relatively smaller, thus better in comparison to the benchmark BTC-USD (40.2%)
  • Looking at downside deviation in of 28.5% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to BTC-USD (37.3%).

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.'

Which means for our asset as example:
  • Looking at the ratio of return and volatility (Sharpe) of 1.24 in the last 5 years of Crypto & Leveraged Top 2 Strategy, we see it is relatively greater, thus better in comparison to the benchmark BTC-USD (1.02)
  • Looking at Sharpe Ratio in of -0.01 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to BTC-USD (0.34).

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:
  • The excess return divided by the downside deviation over 5 years of Crypto & Leveraged Top 2 Strategy is 1.93, which is larger, thus better compared to the benchmark BTC-USD (1.56) in the same period.
  • Looking at excess return divided by the downside deviation in of -0.01 in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to BTC-USD (0.51).

Ulcer:

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Which means for our asset as example:
  • Compared with the benchmark BTC-USD (40 ) in the period of the last 5 years, the Ulcer Ratio of 32 of Crypto & Leveraged Top 2 Strategy is smaller, thus better.
  • Looking at Ulcer Index in of 36 in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to BTC-USD (36 ).

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:
  • Looking at the maximum DrawDown of -64.7 days in the last 5 years of Crypto & Leveraged Top 2 Strategy, we see it is relatively greater, thus better in comparison to the benchmark BTC-USD (-76.6 days)
  • Compared with BTC-USD (-66.1 days) in the period of the last 3 years, the maximum drop from peak to valley of -61.7 days is larger, thus better.

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) in days.'

Applying this definition to our asset in some examples:
  • The maximum days under water over 5 years of Crypto & Leveraged Top 2 Strategy is 773 days, which is larger, thus worse compared to the benchmark BTC-USD (580 days) in the same period.
  • Looking at maximum days below previous high in of 484 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to BTC-USD (441 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.'

Using this definition on our asset we see for example:
  • Looking at the average days below previous high of 260 days in the last 5 years of Crypto & Leveraged Top 2 Strategy, we see it is relatively larger, thus worse in comparison to the benchmark BTC-USD (167 days)
  • Compared with BTC-USD (156 days) in the period of the last 3 years, the average days under water of 183 days is greater, thus worse.

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 Crypto & Leveraged Top 2 Strategy 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.