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.

'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.'

Which means for our asset as example:- Looking at the total return of 30.9% in the last 5 years of Gold-Currency Strategy II, we see it is relatively smaller, thus worse in comparison to the benchmark GLD (56.4%)
- During the last 3 years, the total return, or performance is 6.9%, which is lower, thus worse than the value of 34% from the benchmark.

'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 5.5%, which is smaller, thus worse compared to the benchmark GLD (9.4%) in the same period.
- During the last 3 years, the compounded annual growth rate (CAGR) is 2.3%, which is lower, thus worse than the value of 10.3% from the benchmark.

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Using this definition on our asset we see for example:- Looking at the volatility of 9.6% in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (15.2%)
- During the last 3 years, the volatility is 8.5%, which is smaller, thus better than the value of 14.2% from the benchmark.

'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:- Compared with the benchmark GLD (10.8%) in the period of the last 5 years, the downside deviation of 7.2% of Gold-Currency Strategy II is lower, thus better.
- During the last 3 years, the downside deviation is 6.3%, which is smaller, thus better than the value of 9.7% from the benchmark.

'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:- Compared with the benchmark GLD (0.45) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.32 of Gold-Currency Strategy II is lower, thus worse.
- During the last 3 years, the ratio of return and volatility (Sharpe) is -0.03, which is lower, thus worse than the value of 0.55 from the benchmark.

'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 ratio of annual return and downside deviation over 5 years of Gold-Currency Strategy II is 0.42, which is lower, thus worse compared to the benchmark GLD (0.64) in the same period.
- Compared with GLD (0.8) in the period of the last 3 years, the downside risk / excess return profile of -0.04 is lower, thus worse.

'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:- Compared with the benchmark GLD (9.8 ) in the period of the last 5 years, the Ulcer Ratio of 7.22 of Gold-Currency Strategy II is lower, thus better.
- Looking at Downside risk index in of 8 in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to GLD (8.26 ).

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark GLD (-22 days) in the period of the last 5 years, the maximum drop from peak to valley of -13.8 days of Gold-Currency Strategy II is larger, thus better.
- Looking at maximum DrawDown in of -13.8 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to GLD (-21 days).

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark GLD (897 days) in the period of the last 5 years, the maximum days below previous high of 590 days of Gold-Currency Strategy II is smaller, thus better.
- Compared with GLD (436 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 590 days is larger, thus worse.

'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 (345 days) in the period of the last 5 years, the average time in days below previous high water mark of 214 days of Gold-Currency Strategy II is lower, thus better.
- Compared with GLD (141 days) in the period of the last 3 years, the average days under water of 245 days is larger, thus worse.

Historical returns have been extended using synthetic data.
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- 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.