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 is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Using this definition on our asset we see for example:
  • The total return, or performance over 5 years of Gold-Currency Strategy II is 40%, which is lower, thus worse compared to the benchmark GLD (64.8%) in the same period.
  • During the last 3 years, the total return, or performance is 24.4%, which is smaller, thus worse than the value of 37.6% from the benchmark.

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:
  • The compounded annual growth rate (CAGR) over 5 years of Gold-Currency Strategy II is 7%, which is lower, thus worse compared to the benchmark GLD (10.5%) in the same period.
  • During the last 3 years, the annual performance (CAGR) is 7.5%, which is lower, thus worse than the value of 11.2% from the benchmark.

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 (14%) in the period of the last 5 years, the historical 30 days volatility of 10.3% of Gold-Currency Strategy II is lower, thus better.
  • During the last 3 years, the historical 30 days volatility is 11.5%, which is lower, thus better than the value of 14.5% from the benchmark.

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 deviation of 7% in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (9.7%)
  • Looking at downside deviation in of 8.1% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to GLD (10.3%).

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.'

Applying this definition to our asset in some examples:
  • Looking at the risk / return profile (Sharpe) of 0.44 in the last 5 years of Gold-Currency Strategy II, we see it is relatively smaller, thus worse in comparison to the benchmark GLD (0.57)
  • Looking at ratio of return and volatility (Sharpe) in of 0.44 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (0.6).

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.'

Which means for our asset as example:
  • Compared with the benchmark GLD (0.83) in the period of the last 5 years, the excess return divided by the downside deviation of 0.64 of Gold-Currency Strategy II is lower, thus worse.
  • During the last 3 years, the downside risk / excess return profile is 0.63, which is lower, thus worse than the value of 0.85 from the benchmark.

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:
  • Looking at the Ulcer Index of 3.69 in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (7.13 )
  • During the last 3 years, the Ulcer Ratio is 2.87 , which is lower, thus better than the value of 6.24 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.'

Which means for our asset as example:
  • The maximum DrawDown over 5 years of Gold-Currency Strategy II is -12.5 days, which is larger, thus better compared to the benchmark GLD (-17.8 days) in the same period.
  • During the last 3 years, the maximum drop from peak to valley is -12.5 days, which is higher, thus better than the value of -14 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). 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'

Which means for our asset as example:
  • Looking at the maximum days below previous high of 606 days in the last 5 years of Gold-Currency Strategy II, we see it is relatively smaller, thus better in comparison to the benchmark GLD (741 days)
  • Compared with GLD (352 days) in the period of the last 3 years, the maximum days under water of 203 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 (244 days) in the period of the last 5 years, the average days under water of 179 days of Gold-Currency Strategy II is lower, thus better.
  • During the last 3 years, the average days below previous high is 56 days, which is lower, thus better than the value of 106 days from the benchmark.

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 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.