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:

'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:
  • The total return, or performance over 5 years of Gold-Currency Strategy II is 16.6%, which is lower, thus worse compared to the benchmark GLD (44.8%) in the same period.
  • During the last 3 years, the total return, or increase in value is 13.7%, which is lower, thus worse than the value of 40.2% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark GLD (7.7%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 3.1% of Gold-Currency Strategy II is smaller, thus worse.
  • Looking at annual return (CAGR) in of 4.4% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (11.9%).

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark GLD (13.8%) in the period of the last 5 years, the 30 days standard deviation of 10% of Gold-Currency Strategy II is smaller, thus better.
  • Compared with GLD (15.9%) in the period of the last 3 years, the historical 30 days volatility of 12% is lower, thus better.

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:
  • Looking at the downside risk of 7.2% in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (9.9%)
  • Looking at downside volatility in of 8.6% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to GLD (11.5%).

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.'

Which means for our asset as example:
  • Compared with the benchmark GLD (0.38) in the period of the last 5 years, the risk / return profile (Sharpe) of 0.06 of Gold-Currency Strategy II is smaller, thus worse.
  • Compared with GLD (0.59) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.16 is lower, thus worse.

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.'

Using this definition on our asset we see for example:
  • The excess return divided by the downside deviation over 5 years of Gold-Currency Strategy II is 0.09, which is lower, thus worse compared to the benchmark GLD (0.53) in the same period.
  • Compared with GLD (0.82) in the period of the last 3 years, the excess return divided by the downside deviation of 0.22 is smaller, thus worse.

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.'

Which means for our asset as example:
  • The Ulcer Ratio over 5 years of Gold-Currency Strategy II is 4.8 , which is smaller, thus better compared to the benchmark GLD (8.21 ) in the same period.
  • During the last 3 years, the Ulcer Ratio is 5.6 , which is smaller, thus better than the value of 9.19 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 DrawDown of -12.5 days of Gold-Currency Strategy II is greater, thus better.
  • Looking at maximum reduction from previous high in of -12.5 days in the period of the last 3 years, we see it is relatively larger, 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). 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'

Applying this definition to our asset in some examples:
  • The maximum time in days below previous high water mark over 5 years of Gold-Currency Strategy II is 429 days, which is lower, thus better compared to the benchmark GLD (447 days) in the same period.
  • Compared with GLD (447 days) in the period of the last 3 years, the maximum days under water of 429 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark GLD (146 days) in the period of the last 5 years, the average time in days below previous high water mark of 133 days of Gold-Currency Strategy II is smaller, thus better.
  • Compared with GLD (153 days) in the period of the last 3 years, the average days below previous high of 152 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 Gold-Currency Strategy II 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.