Description of Leveraged Gold-Currency Strategy

The Leveraged Gold-Currency Strategy takes advantage of the historically negative correlation between gold and the U.S. dollar. It switches between the two assets based on their recent risk adjusted performance enabling the strategy to provide protection against severe gold corrections due to dollar strength. It is an excellent addition to existing equity or bond portfolios as it holds very little correlation to either.

This version of the strategy uses inverse leveraged ETFs to generate higher returns, but some retirement accounts are restricted from trading these ETFs. GLD-UUP provides an alternate form of the strategy without leveraged ETFs which also lowers the overall return and volatility.

Statistics of Leveraged Gold-Currency Strategy (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.'

Using this definition on our asset we see for example:
  • The total return, or increase in value over 5 years of Leveraged Gold-Currency Strategy is 66.3%, which is greater, thus better compared to the benchmark GLD (18%) in the same period.
  • Looking at total return, or increase in value in of 21.4% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to GLD (17.6%).

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.'

Which means for our asset as example:
  • Compared with the benchmark GLD (3.4%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 10.7% of Leveraged Gold-Currency Strategy is larger, thus better.
  • During the last 3 years, the compounded annual growth rate (CAGR) is 6.7%, which is higher, thus better than the value of 5.6% 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.'

Which means for our asset as example:
  • The historical 30 days volatility over 5 years of Leveraged Gold-Currency Strategy is 9.8%, which is lower, thus better compared to the benchmark GLD (13.2%) in the same period.
  • Looking at 30 days standard deviation in of 7.2% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (10.8%).

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark GLD (13%) in the period of the last 5 years, the downside volatility of 9.6% of Leveraged Gold-Currency Strategy is lower, thus better.
  • Compared with GLD (11.2%) in the period of the last 3 years, the downside deviation of 7.6% is lower, thus better.

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:
  • The ratio of return and volatility (Sharpe) over 5 years of Leveraged Gold-Currency Strategy is 0.84, which is larger, thus better compared to the benchmark GLD (0.07) in the same period.
  • During the last 3 years, the Sharpe Ratio is 0.58, which is larger, thus better than the value of 0.29 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark GLD (0.07) in the period of the last 5 years, the downside risk / excess return profile of 0.85 of Leveraged Gold-Currency Strategy is higher, thus better.
  • During the last 3 years, the downside risk / excess return profile is 0.55, which is greater, thus better than the value of 0.27 from the benchmark.

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:
  • Compared with the benchmark GLD (8.84 ) in the period of the last 5 years, the Ulcer Ratio of 3.63 of Leveraged Gold-Currency Strategy is lower, thus better.
  • Compared with GLD (6.21 ) in the period of the last 3 years, the Ulcer Ratio of 3.18 is smaller, 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.'

Which means for our asset as example:
  • The maximum drop from peak to valley over 5 years of Leveraged Gold-Currency Strategy is -10.1 days, which is greater, thus better compared to the benchmark GLD (-19.7 days) in the same period.
  • During the last 3 years, the maximum reduction from previous high is -9.2 days, which is greater, thus better than the value of -13.8 days from the benchmark.

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 time in days below previous high water mark of 181 days in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively smaller, thus better in comparison to the benchmark GLD (741 days)
  • Compared with GLD (352 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 181 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.'

Applying this definition to our asset in some examples:
  • Looking at the average days under water of 48 days in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively lower, thus better in comparison to the benchmark GLD (278 days)
  • Compared with GLD (122 days) in the period of the last 3 years, the average time in days below previous high water mark of 51 days is smaller, thus better.

Performance of Leveraged Gold-Currency Strategy (YTD)

Historical returns have been extended using synthetic data.

Allocations of Leveraged Gold-Currency Strategy
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Allocations

Returns of Leveraged Gold-Currency Strategy (%)

  • "Year" returns in the table above are not equal to the sum of monthly returns due to compounding.
  • Performance results of Leveraged Gold-Currency 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.