Description

The Gold-Currency Strategy II 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 strategy is an update to the original GLD-USD strategy that uses inverse leveraged ETFs which are not permitted in some retirement accounts.

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:
  • The total return over 5 years of Gold-Currency Strategy II is 70.7%, which is lower, thus worse compared to the benchmark GLD (86.3%) in the same period.
  • Compared with GLD (75.2%) in the period of the last 3 years, the total return, or performance of 45.5% is lower, thus worse.

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.'

Using this definition on our asset we see for example:
  • The annual performance (CAGR) over 5 years of Gold-Currency Strategy II is 11.3%, which is lower, thus worse compared to the benchmark GLD (13.3%) in the same period.
  • Looking at annual return (CAGR) in of 13.4% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (20.7%).

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 GLD (15.3%) in the period of the last 5 years, the historical 30 days volatility of 10.8% of Gold-Currency Strategy II is smaller, thus better.
  • Looking at historical 30 days volatility in of 11.4% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (15.3%).

DownVol:

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Applying this definition to our asset in some examples:
  • Looking at the downside risk of 7.6% in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (10.7%)
  • Looking at downside deviation in of 7.7% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (10%).

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.'

Using this definition on our asset we see for example:
  • The ratio of return and volatility (Sharpe) over 5 years of Gold-Currency Strategy II is 0.82, which is greater, thus better compared to the benchmark GLD (0.71) in the same period.
  • Looking at risk / return profile (Sharpe) in of 0.96 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (1.19).

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.'

Using this definition on our asset we see for example:
  • The downside risk / excess return profile over 5 years of Gold-Currency Strategy II is 1.16, which is greater, thus better compared to the benchmark GLD (1.01) in the same period.
  • Compared with GLD (1.82) in the period of the last 3 years, the ratio of annual return and downside deviation of 1.42 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.'

Using this definition on our asset we see for example:
  • Looking at the Ulcer Ratio of 7.08 in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (9.76 )
  • Compared with GLD (4.82 ) in the period of the last 3 years, the Downside risk index of 4.36 is lower, thus better.

MaxDD:

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Which means for our asset as example:
  • Compared with the benchmark GLD (-22 days) in the period of the last 5 years, the maximum DrawDown of -13.8 days of Gold-Currency Strategy II is higher, thus better.
  • During the last 3 years, the maximum DrawDown is -9.3 days, which is higher, thus better than the value of -13.4 days from the benchmark.

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:
  • Compared with the benchmark GLD (897 days) in the period of the last 5 years, the maximum days under water of 590 days of Gold-Currency Strategy II is lower, thus better.
  • Looking at maximum days under water in of 294 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to GLD (145 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 Gold-Currency Strategy II is 216 days, which is lower, thus better compared to the benchmark GLD (349 days) in the same period.
  • Looking at average days below previous high in of 77 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to GLD (40 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 Gold-Currency Strategy II 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.