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 (44.4%) in the period of the last 5 years, the total return, or increase in value of 39.1% of Leveraged Gold-Currency Strategy is smaller, thus worse.
  • Compared with GLD (42.6%) in the period of the last 3 years, the total return, or performance of 14.7% 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark GLD (7.6%) in the period of the last 5 years, the annual return (CAGR) of 6.8% of Leveraged Gold-Currency Strategy is lower, thus worse.
  • During the last 3 years, the annual performance (CAGR) is 4.7%, which is lower, thus worse than the value of 12.6% from the benchmark.

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.'

Which means for our asset as example:
  • The volatility over 5 years of Leveraged Gold-Currency Strategy is 9%, which is smaller, thus better compared to the benchmark GLD (13.6%) in the same period.
  • During the last 3 years, the 30 days standard deviation is 9.3%, which is lower, thus better than the value of 14.9% 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.'

Using this definition on our asset we see for example:
  • Looking at the downside deviation of 6.2% in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively smaller, thus better in comparison to the benchmark GLD (9.6%)
  • Compared with GLD (10.6%) in the period of the last 3 years, the downside volatility of 6.7% is lower, thus better.

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:
  • The Sharpe Ratio over 5 years of Leveraged Gold-Currency Strategy is 0.48, which is higher, thus better compared to the benchmark GLD (0.38) in the same period.
  • During the last 3 years, the Sharpe Ratio is 0.24, which is lower, thus worse than the value of 0.68 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.'

Which means for our asset as example:
  • The excess return divided by the downside deviation over 5 years of Leveraged Gold-Currency Strategy is 0.7, which is greater, thus better compared to the benchmark GLD (0.53) in the same period.
  • Compared with GLD (0.95) in the period of the last 3 years, the ratio of annual return and downside deviation of 0.33 is lower, thus worse.

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.'

Applying this definition to our asset in some examples:
  • Looking at the Ulcer Ratio of 3.52 in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively lower, thus better in comparison to the benchmark GLD (8.03 )
  • During the last 3 years, the Downside risk index is 3.95 , which is lower, thus better than the value of 6.9 from the benchmark.

MaxDD:

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Using this definition on our asset we see for example:
  • Looking at the maximum reduction from previous high of -9.7 days in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively greater, thus better in comparison to the benchmark GLD (-18.8 days)
  • Compared with GLD (-18.8 days) in the period of the last 3 years, the maximum reduction from previous high of -9.7 days is higher, thus better.

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:
  • The maximum time in days below previous high water mark over 5 years of Leveraged Gold-Currency Strategy is 181 days, which is smaller, thus better compared to the benchmark GLD (741 days) in the same period.
  • Compared with GLD (213 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 162 days is lower, thus better.

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.'

Which means for our asset as example:
  • Compared with the benchmark GLD (254 days) in the period of the last 5 years, the average time in days below previous high water mark of 49 days of Leveraged Gold-Currency Strategy is smaller, thus better.
  • Compared with GLD (62 days) in the period of the last 3 years, the average time in days below previous high water mark of 58 days is lower, thus better.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations
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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.