This sub-strategy looks at two components and chooses the most appropriate one: A Treasury and a GLD-USD sub-strategy. The addition of gold provides an option for prolonged inflationary environments that could place bonds in a multi-year bear market.

The equity/bond (or in our case HEDGE) pair is interesting because most of the time these two asset classes profit from an inverse correlation. If there is a real stock market correction, money typically flows towards treasuries and gold rewarding holders and providing crash protection.

'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:- Looking at the total return, or performance of 49.1% in the last 5 years of Hedge Strategy, we see it is relatively lower, thus worse in comparison to the benchmark SPY (62.7%)
- Looking at total return in of 24.8% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (34.7%).

'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:- Looking at the annual return (CAGR) of 8.3% in the last 5 years of Hedge Strategy, we see it is relatively lower, thus worse in comparison to the benchmark SPY (10.2%)
- Looking at compounded annual growth rate (CAGR) in of 7.7% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (10.5%).

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (20.9%) in the period of the last 5 years, the volatility of 7.9% of Hedge Strategy is smaller, thus better.
- Compared with SPY (24.1%) in the period of the last 3 years, the historical 30 days volatility of 8.9% is smaller, thus better.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (15.3%) in the period of the last 5 years, the downside deviation of 5.4% of Hedge Strategy is lower, thus better.
- During the last 3 years, the downside risk is 6.2%, which is lower, thus better than the value of 17.6% 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.'

Using this definition on our asset we see for example:- The risk / return profile (Sharpe) over 5 years of Hedge Strategy is 0.74, which is larger, thus better compared to the benchmark SPY (0.37) in the same period.
- Looking at ratio of return and volatility (Sharpe) in of 0.58 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.33).

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (0.51) in the period of the last 5 years, the downside risk / excess return profile of 1.08 of Hedge Strategy is higher, thus better.
- Compared with SPY (0.45) in the period of the last 3 years, the downside risk / excess return profile of 0.84 is greater, thus better.

'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:- Looking at the Downside risk index of 2.38 in the last 5 years of Hedge Strategy, we see it is relatively lower, thus better in comparison to the benchmark SPY (7.71 )
- Looking at Downside risk index in of 2.71 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (9.08 ).

'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.'

Which means for our asset as example:- Looking at the maximum reduction from previous high of -10.8 days in the last 5 years of Hedge Strategy, we see it is relatively higher, thus better in comparison to the benchmark SPY (-33.7 days)
- Looking at maximum reduction from previous high in of -10.8 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (-33.7 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'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (189 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 227 days of Hedge Strategy is greater, thus worse.
- Looking at maximum time in days below previous high water mark in of 227 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (189 days).

'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:- The average days under water over 5 years of Hedge Strategy is 54 days, which is greater, thus worse compared to the benchmark SPY (46 days) in the same period.
- During the last 3 years, the average days below previous high is 65 days, which is higher, thus worse than the value of 45 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 Hedge 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.