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:

'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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark ACWI (105.9%) in the period of the last 5 years, the total return, or increase in value of 119.3% of Global Market Rotation Strategy is higher, thus better.
  • Looking at total return, or increase in value in of 40.4% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to ACWI (31.4%).

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.'

Which means for our asset as example:
  • Looking at the compounded annual growth rate (CAGR) of 17% in the last 5 years of Global Market Rotation Strategy, we see it is relatively larger, thus better in comparison to the benchmark ACWI (15.5%)
  • Compared with ACWI (9.5%) in the period of the last 3 years, the annual return (CAGR) of 12% is higher, thus better.

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:
  • Looking at the historical 30 days volatility of 10.2% in the last 5 years of Global Market Rotation Strategy, we see it is relatively lower, thus better in comparison to the benchmark ACWI (18.2%)
  • Compared with ACWI (21.7%) in the period of the last 3 years, the 30 days standard deviation of 12.3% is smaller, thus better.

DownVol:

'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:
  • Looking at the downside risk of 7.5% in the last 5 years of Global Market Rotation Strategy, we see it is relatively smaller, thus better in comparison to the benchmark ACWI (13.4%)
  • During the last 3 years, the downside risk is 9.2%, which is lower, thus better than the value of 16.2% from the benchmark.

Sharpe:

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Which means for our asset as example:
  • The Sharpe Ratio over 5 years of Global Market Rotation Strategy is 1.42, which is larger, thus better compared to the benchmark ACWI (0.72) in the same period.
  • Looking at ratio of return and volatility (Sharpe) in of 0.77 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to ACWI (0.32).

Sortino:

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Using this definition on our asset we see for example:
  • Compared with the benchmark ACWI (0.97) in the period of the last 5 years, the ratio of annual return and downside deviation of 1.95 of Global Market Rotation Strategy is higher, thus better.
  • Looking at downside risk / excess return profile in of 1.03 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to ACWI (0.43).

Ulcer:

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Applying this definition to our asset in some examples:
  • The Downside risk index over 5 years of Global Market Rotation Strategy is 2.73 , which is lower, thus better compared to the benchmark ACWI (6.28 ) in the same period.
  • Compared with ACWI (8.02 ) in the period of the last 3 years, the Downside risk index of 3.48 is smaller, 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:
  • Compared with the benchmark ACWI (-33.5 days) in the period of the last 5 years, the maximum reduction from previous high of -20.7 days of Global Market Rotation Strategy is higher, thus better.
  • During the last 3 years, the maximum drop from peak to valley is -20.7 days, which is higher, thus better than the value of -33.5 days from the benchmark.

MaxDuration:

'The Maximum 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. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Which means for our asset as example:
  • Looking at the maximum days under water of 94 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 days below previous high in of 94 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to ACWI (373 days).

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 ACWI (81 days) in the period of the last 5 years, the average days under water of 17 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 21 days, which is lower, thus better than the value of 119 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 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.