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, 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.'

Which means for our asset as example:
  • Looking at the total return of 99.9% in the last 5 years of Dow 30 Strategy, we see it is relatively lower, thus worse in comparison to the benchmark DIA (106.5%)
  • During the last 3 years, the total return, or performance is 32.7%, which is lower, thus worse than the value of 36.6% 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 Dow 30 Strategy is 14.9%, which is smaller, thus worse compared to the benchmark DIA (15.6%) in the same period.
  • Looking at compounded annual growth rate (CAGR) in of 9.9% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to DIA (11%).

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.'

Which means for our asset as example:
  • The 30 days standard deviation over 5 years of Dow 30 Strategy is 8.2%, which is smaller, thus better compared to the benchmark DIA (19.9%) in the same period.
  • Looking at volatility in of 9.2% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (24.2%).

DownVol:

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. 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:
  • The downside risk over 5 years of Dow 30 Strategy is 5.7%, which is lower, thus better compared to the benchmark DIA (14.4%) in the same period.
  • During the last 3 years, the downside volatility is 6.5%, which is smaller, thus better than the value of 17.6% from the benchmark.

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:
  • The ratio of return and volatility (Sharpe) over 5 years of Dow 30 Strategy is 1.5, which is higher, thus better compared to the benchmark DIA (0.66) in the same period.
  • Compared with DIA (0.35) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.81 is higher, thus better.

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 downside risk / excess return profile over 5 years of Dow 30 Strategy is 2.17, which is larger, thus better compared to the benchmark DIA (0.91) in the same period.
  • Looking at ratio of annual return and downside deviation in of 1.15 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to DIA (0.48).

Ulcer:

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Applying this definition to our asset in some examples:
  • The Downside risk index over 5 years of Dow 30 Strategy is 1.76 , which is smaller, thus better compared to the benchmark DIA (6.28 ) in the same period.
  • Compared with DIA (7.63 ) in the period of the last 3 years, the Downside risk index of 1.96 is lower, thus better.

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 DrawDown of -13.6 days in the last 5 years of Dow 30 Strategy, we see it is relatively greater, thus better in comparison to the benchmark DIA (-36.7 days)
  • Looking at maximum reduction from previous high in of -13.6 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to DIA (-36.7 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.'

Applying this definition to our asset in some examples:
  • Looking at the maximum time in days below previous high water mark of 125 days in the last 5 years of Dow 30 Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (187 days)
  • Compared with DIA (187 days) in the period of the last 3 years, the maximum days under water of 73 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.'

Which means for our asset as example:
  • The average days below previous high over 5 years of Dow 30 Strategy is 20 days, which is lower, thus better compared to the benchmark DIA (47 days) in the same period.
  • Compared with DIA (50 days) in the period of the last 3 years, the average days below previous high of 17 days is smaller, thus better.

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 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.