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.'

Which means for our asset as example:
  • Looking at the total return, or performance of 51.4% in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively smaller, thus worse in comparison to the benchmark GLD (60%)
  • Looking at total return in of 17% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (46.5%).

CAGR:

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Applying this definition to our asset in some examples:
  • The annual performance (CAGR) over 5 years of Leveraged Gold-Currency Strategy is 8.6%, which is smaller, thus worse compared to the benchmark GLD (9.9%) in the same period.
  • During the last 3 years, the annual return (CAGR) is 5.4%, which is lower, thus worse than the value of 13.6% 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.'

Using this definition on our asset we see for example:
  • Looking at the historical 30 days volatility of 9.6% in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively lower, thus better in comparison to the benchmark GLD (13.8%)
  • Looking at volatility in of 9.2% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (13.8%).

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:
  • Looking at the downside volatility of 6.5% in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively smaller, thus better in comparison to the benchmark GLD (9.5%)
  • During the last 3 years, the downside volatility is 6.6%, which is lower, thus better than the value of 9.5% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Looking at the ratio of return and volatility (Sharpe) of 0.64 in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively larger, thus better in comparison to the benchmark GLD (0.53)
  • Looking at Sharpe Ratio in of 0.31 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (0.81).

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.'

Applying this definition to our asset in some examples:
  • Looking at the downside risk / excess return profile of 0.95 in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively larger, thus better in comparison to the benchmark GLD (0.78)
  • Looking at downside risk / excess return profile in of 0.44 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (1.16).

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.'

Using this definition on our asset we see for example:
  • Looking at the Downside risk index of 3.09 in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively smaller, thus better in comparison to the benchmark GLD (7.03 )
  • Looking at Ulcer Index in of 3.45 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (5.6 ).

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.'

Which means for our asset as example:
  • Compared with the benchmark GLD (-17.8 days) in the period of the last 5 years, the maximum DrawDown of -9.5 days of Leveraged Gold-Currency Strategy is greater, thus better.
  • Looking at maximum reduction from previous high in of -9.5 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to GLD (-13.8 days).

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 days below previous high over 5 years of Leveraged Gold-Currency Strategy is 181 days, which is lower, thus better compared to the benchmark GLD (741 days) in the same period.
  • Looking at maximum days below previous high in of 181 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (352 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:
  • The average time in days below previous high water mark over 5 years of Leveraged Gold-Currency Strategy is 42 days, which is smaller, thus better compared to the benchmark GLD (241 days) in the same period.
  • Looking at average days below previous high in of 51 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (100 days).

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.