Description

The Dow 30 strategy is a good way to invest in the best of the Dow 30 blue chips while avoiding the old fashioned underperforming members of the Dow 30 index.

The strategy uses a risk-adjusted momentum algorithm to choose the top four Dow 30 stocks with a variable allocation to treasuries or gold to smooth the equity curve and provide crash protection in bear markets. The strategy combines well with our more conservative strategies, such as the Bond Rotation Strategy or BUG, or with one of our non-U.S. equity strategies such as World Top 4, to form a well balanced portfolio.

The performance of the Dow 30 strategy is quite similar to the simpler US Market Strategy, however in volatile markets, the stock picking Dow 30 can outperformed the Dow 30 index.

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:
  • Looking at the total return of 101.5% in the last 5 years of Dow 30 Strategy, we see it is relatively higher, thus better in comparison to the benchmark DIA (64.6%)
  • Compared with DIA (32.1%) in the period of the last 3 years, the total return of 52.9% is higher, 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.'

Which means for our asset as example:
  • Looking at the annual performance (CAGR) of 15.1% in the last 5 years of Dow 30 Strategy, we see it is relatively greater, thus better in comparison to the benchmark DIA (10.5%)
  • Looking at annual return (CAGR) in of 15.2% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to DIA (9.7%).

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:
  • Compared with the benchmark DIA (21%) in the period of the last 5 years, the 30 days standard deviation of 9.3% of Dow 30 Strategy is smaller, thus better.
  • Looking at volatility in of 9.7% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to DIA (24.3%).

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 DIA (15.3%) in the period of the last 5 years, the downside volatility of 6.5% of Dow 30 Strategy is lower, thus better.
  • During the last 3 years, the downside volatility is 6.8%, which is lower, thus better than the value of 17.7% from the benchmark.

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:
  • The ratio of return and volatility (Sharpe) over 5 years of Dow 30 Strategy is 1.35, which is higher, thus better compared to the benchmark DIA (0.38) in the same period.
  • During the last 3 years, the risk / return profile (Sharpe) is 1.31, which is higher, thus better than the value of 0.3 from the benchmark.

Sortino:

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Which means for our asset as example:
  • Compared with the benchmark DIA (0.52) in the period of the last 5 years, the downside risk / excess return profile of 1.93 of Dow 30 Strategy is greater, thus better.
  • Looking at downside risk / excess return profile in of 1.88 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to DIA (0.41).

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:
  • Compared with the benchmark DIA (7.15 ) in the period of the last 5 years, the Ulcer Index of 1.93 of Dow 30 Strategy is smaller, thus better.
  • Compared with DIA (8.22 ) in the period of the last 3 years, the Downside risk index of 2.08 is smaller, thus better.

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 drop from peak to valley of -10.9 days in the last 5 years of Dow 30 Strategy, we see it is relatively larger, thus better in comparison to the benchmark DIA (-36.7 days)
  • Looking at maximum DrawDown in of -10.9 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to DIA (-36.7 days).

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'

Which means for our asset as example:
  • Looking at the maximum time in days below previous high water mark of 123 days in the last 5 years of Dow 30 Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (187 days)
  • Looking at maximum time in days below previous high water mark in of 78 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to DIA (187 days).

AveDuration:

'The Average 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. 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 under water over 5 years of Dow 30 Strategy is 23 days, which is smaller, thus better compared to the benchmark DIA (52 days) in the same period.
  • Looking at average time in days below previous high water mark in of 20 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (49 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 Dow 30 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.