Description

The Dow 30 strategy is a good way to invest in the best of the Dow 30 blue chips while avoiding the old fashioned underperforming members of the Dow 30 index.

The strategy uses a risk-adjusted momentum algorithm to choose the top four Dow 30 stocks with a variable allocation to treasuries or gold to smooth the equity curve and provide crash protection in bear markets. The strategy combines well with our more conservative strategies, such as the Bond Rotation Strategy or BUG, or with one of our non-U.S. equity strategies such as World Top 4, to form a well balanced portfolio.

The performance of the Dow 30 strategy is quite similar to the simpler US Market Strategy, however in volatile markets, the stock picking Dow 30 can outperformed the Dow 30 index.

Statistics (YTD)

What do these metrics mean? [Read More] [Hide]

TotalReturn:

'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.'

Applying this definition to our asset in some examples:
  • Looking at the total return, or performance of 94.9% in the last 5 years of Dow 30 Strategy, we see it is relatively larger, thus better in comparison to the benchmark DIA (53.7%)
  • Compared with DIA (27.8%) in the period of the last 3 years, the total return of 56.4% is greater, thus better.

CAGR:

'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:
  • Compared with the benchmark DIA (9%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 14.3% of Dow 30 Strategy is larger, thus better.
  • Compared with DIA (8.5%) in the period of the last 3 years, the annual return (CAGR) of 16.1% is greater, thus better.

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 DIA (21.6%) in the period of the last 5 years, the 30 days standard deviation of 9.4% of Dow 30 Strategy is smaller, thus better.
  • Looking at 30 days standard deviation in of 9.7% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (24.9%).

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:
  • Compared with the benchmark DIA (15.7%) in the period of the last 5 years, the downside deviation of 6.6% of Dow 30 Strategy is lower, thus better.
  • Looking at downside volatility in of 6.7% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to DIA (18%).

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:
  • Looking at the risk / return profile (Sharpe) of 1.26 in the last 5 years of Dow 30 Strategy, we see it is relatively larger, thus better in comparison to the benchmark DIA (0.3)
  • During the last 3 years, the ratio of return and volatility (Sharpe) is 1.4, which is higher, thus better than the value of 0.24 from the benchmark.

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:
  • Compared with the benchmark DIA (0.41) in the period of the last 5 years, the excess return divided by the downside deviation of 1.8 of Dow 30 Strategy is larger, thus better.
  • Looking at ratio of annual return and downside deviation in of 2.04 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to DIA (0.33).

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.'

Using this definition on our asset we see for example:
  • Looking at the Downside risk index of 2.22 in the last 5 years of Dow 30 Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (7.86 )
  • Looking at Downside risk index in of 2.37 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (9.22 ).

MaxDD:

'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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark DIA (-36.7 days) in the period of the last 5 years, the maximum DrawDown of -10.9 days of Dow 30 Strategy is larger, thus better.
  • Compared with DIA (-36.7 days) in the period of the last 3 years, the maximum reduction from previous high of -10.9 days is greater, 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) in days.'

Which means for our asset as example:
  • Looking at the maximum days under water of 163 days in the last 5 years of Dow 30 Strategy, we see it is relatively smaller, thus better in comparison to the benchmark DIA (234 days)
  • Compared with DIA (234 days) in the period of the last 3 years, the maximum days below previous high of 163 days is lower, 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.'

Applying this definition to our asset in some examples:
  • Looking at the average time in days below previous high water mark of 32 days in the last 5 years of Dow 30 Strategy, we see it is relatively smaller, thus better in comparison to the benchmark DIA (65 days)
  • Compared with DIA (70 days) in the period of the last 3 years, the average days under water of 31 days is lower, thus better.

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 Dow 30 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.