Description

The Global Market Rotation Strategy is one of our core investment strategies. The strategy invests on a monthly basis in one of five broad global markets. It hedges the global equity exposure with variable allocation to the HEDGE sub-strategy.

Version History

December 2016 Update: We are enhancing the Treasury hedge. Before we allocated part of the portfolio to longer-term treasuries, namely the 3x leveraged ETF version, TMF. From now on we will be allocating to the best bond ETF as chosen by our Bond Rotation strategy (BRS). BRS choses from the JNK, CWB,PCY and TLT ETFs.

December 2015 Update: We are adding currency hedged ETFs in the universe that our algorithm can see. That means that we allow our algorithms to choose between a non-hedged ETF like EWG or a hedged ETF like HEWG. This allows our algorithm to input dollar strength as an additional parameter and be able to respond accordingly. This does not change the current logic, which is to bet on the best performing regions or countries. What it does is that it allows, in the case of extended dollar strength, to partially neutralize foreign currency risk for our U.S. based investors.

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:
  • Looking at the total return, or performance of 93.2% in the last 5 years of Global Market Rotation Strategy, we see it is relatively greater, thus better in comparison to the benchmark ACWI (46.5%)
  • During the last 3 years, the total return is 59.9%, which is larger, thus better than the value of 31.3% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark ACWI (7.9%) in the period of the last 5 years, the annual return (CAGR) of 14.1% of Global Market Rotation Strategy is larger, thus better.
  • Looking at annual performance (CAGR) in of 17% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to ACWI (9.5%).

Volatility:

'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:
  • Compared with the benchmark ACWI (19.4%) in the period of the last 5 years, the 30 days standard deviation of 9.7% of Global Market Rotation Strategy is lower, thus better.
  • Compared with ACWI (22.7%) in the period of the last 3 years, the historical 30 days volatility of 10.7% is lower, thus better.

DownVol:

'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.'

Which means for our asset as example:
  • The downside risk over 5 years of Global Market Rotation Strategy is 6.9%, which is lower, thus better compared to the benchmark ACWI (14.4%) in the same period.
  • Compared with ACWI (16.8%) in the period of the last 3 years, the downside deviation of 7.6% is lower, thus better.

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:
  • Compared with the benchmark ACWI (0.28) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.2 of Global Market Rotation Strategy is higher, thus better.
  • During the last 3 years, the Sharpe Ratio is 1.35, which is higher, thus better than the value of 0.31 from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Looking at the ratio of annual return and downside deviation of 1.69 in the last 5 years of Global Market Rotation Strategy, we see it is relatively higher, thus better in comparison to the benchmark ACWI (0.38)
  • Looking at excess return divided by the downside deviation in of 1.9 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to ACWI (0.42).

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.'

Applying this definition to our asset in some examples:
  • The Ulcer Ratio over 5 years of Global Market Rotation Strategy is 2.78 , which is lower, thus better compared to the benchmark ACWI (7.73 ) in the same period.
  • Compared with ACWI (8.57 ) in the period of the last 3 years, the Ulcer Ratio of 2.98 is lower, thus better.

MaxDD:

'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.'

Which means for our asset as example:
  • The maximum DrawDown over 5 years of Global Market Rotation Strategy is -14.4 days, which is larger, thus better compared to the benchmark ACWI (-33.5 days) in the same period.
  • Compared with ACWI (-33.5 days) in the period of the last 3 years, the maximum DrawDown of -14.4 days is larger, thus better.

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.'

Which means for our asset as example:
  • Looking at the maximum days under water of 148 days in the last 5 years of Global Market Rotation Strategy, we see it is relatively lower, thus better in comparison to the benchmark ACWI (373 days)
  • Looking at maximum time in days below previous high water mark in of 102 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to ACWI (150 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:
  • Compared with the benchmark ACWI (87 days) in the period of the last 5 years, the average days below previous high of 33 days of Global Market Rotation Strategy is lower, thus better.
  • During the last 3 years, the average time in days below previous high water mark is 27 days, which is lower, thus better than the value of 38 days from the benchmark.

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 Global Market Rotation Strategy 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.