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.'

Using this definition on our asset we see for example:
  • Looking at the total return, or performance of 168.7% in the last 5 years of Top 3 Strategies, we see it is relatively higher, thus better in comparison to the benchmark SPY (93.6%)
  • Compared with SPY (33.2%) in the period of the last 3 years, the total return of 33.4% is larger, thus better.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (14.2%) in the period of the last 5 years, the annual return (CAGR) of 21.9% of Top 3 Strategies is greater, thus better.
  • During the last 3 years, the annual performance (CAGR) is 10.1%, which is greater, thus better than the value of 10% from the benchmark.

Volatility:

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Applying this definition to our asset in some examples:
  • Looking at the volatility of 10.5% in the last 5 years of Top 3 Strategies, we see it is relatively smaller, thus better in comparison to the benchmark SPY (20.9%)
  • During the last 3 years, the volatility is 8.6%, which is smaller, thus better than the value of 17.5% from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Looking at the downside volatility of 7.1% in the last 5 years of Top 3 Strategies, we see it is relatively smaller, thus better in comparison to the benchmark SPY (15%)
  • Looking at downside deviation in of 5.9% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (12.2%).

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:
  • Looking at the Sharpe Ratio of 1.84 in the last 5 years of Top 3 Strategies, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.56)
  • Looking at ratio of return and volatility (Sharpe) in of 0.88 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.43).

Sortino:

'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:
  • Looking at the excess return divided by the downside deviation of 2.72 in the last 5 years of Top 3 Strategies, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.78)
  • Compared with SPY (0.62) in the period of the last 3 years, the downside risk / excess return profile of 1.28 is larger, thus better.

Ulcer:

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Applying this definition to our asset in some examples:
  • The Downside risk index over 5 years of Top 3 Strategies is 4.11 , which is lower, thus better compared to the benchmark SPY (9.33 ) in the same period.
  • Looking at Downside risk index in of 4.89 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (10 ).

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.'

Using this definition on our asset we see for example:
  • Looking at the maximum reduction from previous high of -14.3 days in the last 5 years of Top 3 Strategies, we see it is relatively greater, thus better in comparison to the benchmark SPY (-33.7 days)
  • Compared with SPY (-24.5 days) in the period of the last 3 years, the maximum drop from peak to valley of -11 days is higher, 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). 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:
  • Looking at the maximum days under water of 370 days in the last 5 years of Top 3 Strategies, we see it is relatively lower, thus better in comparison to the benchmark SPY (488 days)
  • Compared with SPY (488 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 370 days is smaller, thus better.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (123 days) in the period of the last 5 years, the average days under water of 78 days of Top 3 Strategies is lower, thus better.
  • During the last 3 years, the average days below previous high is 113 days, which is lower, thus better than the value of 180 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 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.