Description

The World Country Top 4 Strategy is a momentum driven strategy that invests in the top four single country ETFs. It will add geographic diversity to your portfolio with significant non-U.S. equity exposure.

The strategy consists of four sub-strategies. Each sub-strategy invests in the best country ETF in a specific geographic area (i.e., Africa, Asia, Latin America, etc). These strategies are then combined to yield four country ETFs that come from different geographic segments, thus avoiding overconcentration. So even if one region is outperforming all the other areas, this strategy will still diversify among three additional top performing regions.

Like our other equity-based strategies, this strategy is hedged with a sub-strategy (HEDGE) that includes, amongst others, safe heaven assets like treasuries and gold.

Methodology & Assets

Country ETFs:

  • AFK Market Vectors Africa Index
  • ASHR Deutsche X-Trackers CSI 300 China A Shares
  • ECH iShares MSCI Chile Fund
  • EGPT Market Vectors Egypt Index
  • EIDO iShares MSCI Indonesia Index
  • EIRL iShares MSCI Ireland Capped
  • EIS iShares MSCI Israel
  • ENZL iShares MSCI New Zealand Investable Market
  • EPHE iShares MSCI Philippines
  • EPI WisdomTree India Earnings Index
  • EPOL iShares MSCI Poland Index
  • EPU iShares MSCI Peru Index
  • EWA iShares MSCI Australia Index Fund
  • EWC iShares MSCI Canada Index Fund
  • EWD iShares MSCI Sweden Index
  • EWG iShares MSCI Germany Index
  • EWH iShares MSCI Hong Kong Index Fund
  • EWI iShares MSCI Italy Index
  • EWJ iShares MSCI Japan Index Fund
  • EWK iShares MSCI Belgium Index
  • EWL iShares MSCI Switzerland
  • EWM iShares MSCI Malaysia Index Fund
  • EWN iShares MSCI Netherlands Index
  • EWO iShares MSCI Austria Index
  • EWP iShares MSCI Spain Index
  • EWQ iShares MSCI France
  • EWS iShares MSCI Singapore Index
  • EWT iShares MSCI Taiwan Index Fund
  • EWU iShares MSCI United Kingdom Index
  • EWW iShares MSCI Mexico Index Fund
  • EWY iShares MSCI South Korea Index Fund
  • EWZ iShares MSCI Brazil Index Fund
  • EZA iShares MSCI South Africa Index
  • FM iShares MSCI Frontier Markets ETF
  • FRN Guggenheim BNY Mellon Frontier Mkts
  • FXI iShares FTSE China 25 Index Fund
  • GAF SPDR S&P E.M. Middle East & Africa
  • GULF WisdomTree Middle East Dividend Index
  • GREK Global X FTSE Greece 20
  • GXG Global X Interbolsa FTSE Colombia 20
  • IDX Market Vectors Indonesia
  • MCHI iShares MSCI China Index
  • MES Market Vectors DJ Gulf States (GCC) Titans
  • NORW Global X FTSE Norway 30 ETF
  • QQQ PowerShares Nasdaq-100 Index
  • RSX Market Vectors DAXglobal Russia
  • THD iShares MSCI Thailand Index
  • TUR iShares MSCI Turkey
  • VNM Market Vectors Vietnam

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, or performance over 5 years of World Top 4 Strategy is 46.1%, which is lower, thus worse compared to the benchmark ACWI (95%) in the same period.
  • During the last 3 years, the total return, or increase in value is 27.1%, which is smaller, thus worse than the value of 56.6% from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark ACWI (14.3%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 7.9% of World Top 4 Strategy is smaller, thus worse.
  • Compared with ACWI (16.1%) in the period of the last 3 years, the annual performance (CAGR) of 8.3% is lower, thus worse.

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:
  • Compared with the benchmark ACWI (17.9%) in the period of the last 5 years, the 30 days standard deviation of 8.2% of World Top 4 Strategy is smaller, thus better.
  • Looking at 30 days standard deviation in of 9.9% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to ACWI (21.2%).

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 deviation over 5 years of World Top 4 Strategy is 6%, which is lower, thus better compared to the benchmark ACWI (13.2%) in the same period.
  • During the last 3 years, the downside deviation is 7.3%, which is lower, thus better than the value of 15.7% from the benchmark.

Sharpe:

'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.'

Applying this definition to our asset in some examples:
  • Looking at the risk / return profile (Sharpe) of 0.66 in the last 5 years of World Top 4 Strategy, we see it is relatively greater, thus better in comparison to the benchmark ACWI (0.66)
  • Compared with ACWI (0.64) in the period of the last 3 years, the Sharpe Ratio of 0.59 is lower, thus worse.

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.'

Which means for our asset as example:
  • Compared with the benchmark ACWI (0.89) in the period of the last 5 years, the ratio of annual return and downside deviation of 0.9 of World Top 4 Strategy is higher, thus better.
  • During the last 3 years, the excess return divided by the downside deviation is 0.8, which is lower, thus worse than the value of 0.87 from the benchmark.

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.'

Which means for our asset as example:
  • The Ulcer Index over 5 years of World Top 4 Strategy is 2.37 , which is lower, thus better compared to the benchmark ACWI (6.27 ) in the same period.
  • Looking at Ulcer Ratio in of 2.85 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to ACWI (6.53 ).

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:
  • Compared with the benchmark ACWI (-33.5 days) in the period of the last 5 years, the maximum drop from peak to valley of -17.1 days of World Top 4 Strategy is larger, thus better.
  • Looking at maximum DrawDown in of -17.1 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to ACWI (-33.5 days).

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 below previous high of 148 days in the last 5 years of World Top 4 Strategy, we see it is relatively lower, thus better in comparison to the benchmark ACWI (373 days)
  • Looking at maximum days under water in of 100 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to ACWI (133 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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark ACWI (81 days) in the period of the last 5 years, the average days below previous high of 32 days of World Top 4 Strategy is smaller, thus better.
  • During the last 3 years, the average time in days below previous high water mark is 26 days, which is higher, thus worse than the value of 26 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 World Top 4 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.