Description

The Bond Rotation Strategy is one of our core investment strategies. It is appropriate for investors looking to collect bond dividends while pursuing growth by rotating between bond sectors. The strategy evaluates and allocates to the best performing bond ETFs including treasuries, TIPS, foreign, high-yield and convertible bonds. This is a good strategy if you are looking for a safe long-term investment with low risk.

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.'

Applying this definition to our asset in some examples:
  • The total return over 5 years of Bond ETF Rotation Strategy is 26.8%, which is larger, thus better compared to the benchmark AGG (19.3%) in the same period.
  • Looking at total return, or performance in of 10.2% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to AGG (16.9%).

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 Bond ETF Rotation Strategy is 4.9%, which is greater, thus better compared to the benchmark AGG (3.6%) in the same period.
  • Compared with AGG (5.4%) in the period of the last 3 years, the annual performance (CAGR) of 3.3% is lower, thus worse.

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.'

Applying this definition to our asset in some examples:
  • Looking at the historical 30 days volatility of 10.9% in the last 5 years of Bond ETF Rotation Strategy, we see it is relatively higher, thus worse in comparison to the benchmark AGG (4.7%)
  • Compared with AGG (5.3%) in the period of the last 3 years, the historical 30 days volatility of 13.2% is higher, thus worse.

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:
  • Looking at the downside volatility of 8.9% in the last 5 years of Bond ETF Rotation Strategy, we see it is relatively larger, thus worse in comparison to the benchmark AGG (3.5%)
  • During the last 3 years, the downside volatility is 11%, which is higher, thus worse than the value of 4.1% 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.'

Which means for our asset as example:
  • Compared with the benchmark AGG (0.24) in the period of the last 5 years, the Sharpe Ratio of 0.22 of Bond ETF Rotation Strategy is lower, thus worse.
  • During the last 3 years, the ratio of return and volatility (Sharpe) is 0.06, which is lower, thus worse than the value of 0.53 from the benchmark.

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 Bond ETF Rotation Strategy is 0.26, which is lower, thus worse compared to the benchmark AGG (0.31) in the same period.
  • Looking at ratio of annual return and downside deviation in of 0.07 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to AGG (0.7).

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.'

Which means for our asset as example:
  • Looking at the Ulcer Index of 3.35 in the last 5 years of Bond ETF Rotation Strategy, we see it is relatively higher, thus worse in comparison to the benchmark AGG (1.7 )
  • Compared with AGG (1.57 ) in the period of the last 3 years, the Ulcer Ratio of 4.06 is larger, thus worse.

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 AGG (-9.6 days) in the period of the last 5 years, the maximum reduction from previous high of -32.4 days of Bond ETF Rotation Strategy is lower, thus worse.
  • During the last 3 years, the maximum DrawDown is -32.4 days, which is lower, thus worse than the value of -9.6 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.'

Using this definition on our asset we see for example:
  • Looking at the maximum time in days below previous high water mark of 182 days in the last 5 years of Bond ETF Rotation Strategy, we see it is relatively smaller, thus better in comparison to the benchmark AGG (331 days)
  • Compared with AGG (331 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 71 days is smaller, thus better.

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:
  • Looking at the average days below previous high of 28 days in the last 5 years of Bond ETF Rotation Strategy, we see it is relatively lower, thus better in comparison to the benchmark AGG (105 days)
  • During the last 3 years, the average days under water is 16 days, which is lower, thus better than the value of 91 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 Bond ETF 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.