Description

The Leveraged Gold-Currency Strategy 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 version of the strategy uses inverse leveraged ETFs to generate higher returns, but some retirement accounts are restricted from trading these ETFs. GLD-UUP provides an alternate form of the strategy without leveraged ETFs which also lowers the overall return and volatility.

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 GLD (37.8%) in the period of the last 5 years, the total return, or increase in value of 100.2% of Leveraged Gold-Currency Strategy is greater, thus better.
  • Compared with GLD (18.4%) in the period of the last 3 years, the total return, or performance of 65.6% is larger, 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:
  • The annual performance (CAGR) over 5 years of Leveraged Gold-Currency Strategy is 14.9%, which is greater, thus better compared to the benchmark GLD (6.6%) in the same period.
  • Looking at annual performance (CAGR) in of 18.3% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to GLD (5.8%).

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark GLD (13.9%) in the period of the last 5 years, the 30 days standard deviation of 9.9% of Leveraged Gold-Currency Strategy is lower, thus better.
  • During the last 3 years, the historical 30 days volatility is 11.2%, which is smaller, thus better than the value of 15.8% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark GLD (10%) in the period of the last 5 years, the downside risk of 6.5% of Leveraged Gold-Currency Strategy is smaller, thus better.
  • Compared with GLD (11.6%) in the period of the last 3 years, the downside volatility of 7.5% is lower, thus better.

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.'

Which means for our asset as example:
  • The ratio of return and volatility (Sharpe) over 5 years of Leveraged Gold-Currency Strategy is 1.25, which is greater, thus better compared to the benchmark GLD (0.3) in the same period.
  • Compared with GLD (0.21) in the period of the last 3 years, the risk / return profile (Sharpe) of 1.41 is higher, thus better.

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.'

Applying this definition to our asset in some examples:
  • The downside risk / excess return profile over 5 years of Leveraged Gold-Currency Strategy is 1.9, which is greater, thus better compared to the benchmark GLD (0.41) in the same period.
  • Compared with GLD (0.28) in the period of the last 3 years, the ratio of annual return and downside deviation of 2.12 is greater, thus better.

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.'

Which means for our asset as example:
  • Compared with the benchmark GLD (8.71 ) in the period of the last 5 years, the Ulcer Index of 3.47 of Leveraged Gold-Currency Strategy is smaller, thus better.
  • During the last 3 years, the Downside risk index is 4.26 , which is lower, thus better than the value of 9.97 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:
  • Compared with the benchmark GLD (-18.8 days) in the period of the last 5 years, the maximum drop from peak to valley of -10.8 days of Leveraged Gold-Currency Strategy is larger, thus better.
  • Looking at maximum reduction from previous high in of -10.8 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to GLD (-18.8 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) in days.'

Applying this definition to our asset in some examples:
  • Looking at the maximum days below previous high of 297 days in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively lower, thus better in comparison to the benchmark GLD (505 days)
  • Looking at maximum days below previous high in of 297 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (505 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:
  • Compared with the benchmark GLD (167 days) in the period of the last 5 years, the average days under water of 59 days of Leveraged Gold-Currency Strategy is smaller, thus better.
  • Compared with GLD (188 days) in the period of the last 3 years, the average time in days below previous high water mark of 77 days is lower, 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 Leveraged Gold-Currency 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.