Description

This strategy selects the top three performers from our core strategies, based on the most recent 6 month performance, and allocates one third to each of them.

Note that very often the strategy will invest in the more aggressive of our strategies, which might not be suitable for all investors. You can create your version of this strategy with our Portfolio Builder. Simply select the top 2, 3, or 4 strategies and assign equal weights to each or adjust your allocations for your risk level. You will need to manually review and update the top performers periodically.

Methodology & Assets

All of our current strategies are included in the algorithm.

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:
  • The total return over 5 years of Top 3 Strategies is 187.5%, which is greater, thus better compared to the benchmark SPY (81.5%) in the same period.
  • During the last 3 years, the total return, or performance is 118.8%, which is larger, thus better than the value of 48.1% from the benchmark.

CAGR:

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Applying this definition to our asset in some examples:
  • The compounded annual growth rate (CAGR) over 5 years of Top 3 Strategies is 23.6%, which is higher, thus better compared to the benchmark SPY (12.7%) in the same period.
  • Looking at annual performance (CAGR) in of 29.9% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (14%).

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:
  • Looking at the 30 days standard deviation of 10.7% in the last 5 years of Top 3 Strategies, we see it is relatively lower, thus better in comparison to the benchmark SPY (20.5%)
  • Compared with SPY (23.8%) in the period of the last 3 years, the 30 days standard deviation of 12.2% is lower, thus better.

DownVol:

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

Using this definition on our asset we see for example:
  • The downside deviation over 5 years of Top 3 Strategies is 7.3%, which is lower, thus better compared to the benchmark SPY (15%) in the same period.
  • Looking at downside risk in of 8.3% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (17.3%).

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.'

Which means for our asset as example:
  • The Sharpe Ratio over 5 years of Top 3 Strategies is 1.97, which is larger, thus better compared to the benchmark SPY (0.5) in the same period.
  • Looking at Sharpe Ratio in of 2.25 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.48).

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.'

Applying this definition to our asset in some examples:
  • The ratio of annual return and downside deviation over 5 years of Top 3 Strategies is 2.88, which is higher, thus better compared to the benchmark SPY (0.68) in the same period.
  • Looking at downside risk / excess return profile in of 3.29 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.66).

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:
  • Compared with the benchmark SPY (7.13 ) in the period of the last 5 years, the Ulcer Ratio of 2.65 of Top 3 Strategies is lower, thus better.
  • During the last 3 years, the Ulcer Ratio is 2.83 , which is smaller, thus better than the value of 8.25 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum reduction from previous high of -14.3 days of Top 3 Strategies is higher, thus better.
  • During the last 3 years, the maximum reduction from previous high is -14.3 days, which is larger, thus better than the value of -33.7 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) in days.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (150 days) in the period of the last 5 years, the maximum days under water of 118 days of Top 3 Strategies is lower, thus better.
  • Looking at maximum time in days below previous high water mark in of 95 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (150 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.'

Which means for our asset as example:
  • The average days below previous high over 5 years of Top 3 Strategies is 25 days, which is smaller, thus better compared to the benchmark SPY (41 days) in the same period.
  • Looking at average days under water in of 21 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (36 days).

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 Top 3 Strategies 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.