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.

'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:- Compared with the benchmark GLD (41.9%) in the period of the last 5 years, the total return, or increase in value of 42.1% of Gold-Currency Strategy II is larger, thus better.
- Compared with GLD (21.7%) in the period of the last 3 years, the total return, or increase in value of 20.4% is smaller, thus worse.

'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.'

Which means for our asset as example:- Looking at the annual performance (CAGR) of 7.3% in the last 5 years of Gold-Currency Strategy II, we see it is relatively larger, thus better in comparison to the benchmark GLD (7.3%)
- During the last 3 years, the annual return (CAGR) is 6.4%, which is smaller, thus worse than the value of 6.8% 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 30 days standard deviation of 8.7% in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (14.4%)
- Looking at volatility in of 9% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (16.4%).

'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.'

Using this definition on our asset we see for example:- The downside volatility over 5 years of Gold-Currency Strategy II is 6.4%, which is smaller, thus better compared to the benchmark GLD (10.2%) in the same period.
- During the last 3 years, the downside deviation is 6.9%, which is smaller, thus better than the value of 11.8% 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.'

Which means for our asset as example:- Looking at the risk / return profile (Sharpe) of 0.55 in the last 5 years of Gold-Currency Strategy II, we see it is relatively larger, thus better in comparison to the benchmark GLD (0.33)
- Compared with GLD (0.26) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.43 is higher, thus better.

'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.'

Which means for our asset as example:- The ratio of annual return and downside deviation over 5 years of Gold-Currency Strategy II is 0.75, which is higher, thus better compared to the benchmark GLD (0.47) in the same period.
- Looking at excess return divided by the downside deviation in of 0.57 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to GLD (0.36).

'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 (9.93 ) in the period of the last 5 years, the Ulcer Ratio of 4.95 of Gold-Currency Strategy II is lower, thus better.
- Compared with GLD (12 ) in the period of the last 3 years, the Ulcer Index of 6.01 is lower, thus better.

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Applying this definition to our asset in some examples:- The maximum DrawDown over 5 years of Gold-Currency Strategy II is -9.9 days, which is larger, thus better compared to the benchmark GLD (-22 days) in the same period.
- Looking at maximum DrawDown in of -9.9 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to GLD (-22 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). 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:- Compared with the benchmark GLD (626 days) in the period of the last 5 years, the maximum days below previous high of 396 days of Gold-Currency Strategy II is smaller, thus better.
- Compared with GLD (626 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 396 days is smaller, thus better.

'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.'

Which means for our asset as example:- Compared with the benchmark GLD (215 days) in the period of the last 5 years, the average days below previous high of 123 days of Gold-Currency Strategy II is smaller, thus better.
- During the last 3 years, the average days under water is 149 days, which is lower, thus better than the value of 274 days from the benchmark.

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, 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.