Description

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 (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.'

Using this definition on our asset we see for example:
  • Looking at the total return, or performance of 56.3% in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively smaller, thus worse in comparison to the benchmark GLD (64.4%)
  • Looking at total return, or performance in of 18% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (45.8%).

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:
  • The annual performance (CAGR) over 5 years of Leveraged Gold-Currency Strategy is 9.3%, which is smaller, thus worse compared to the benchmark GLD (10.4%) in the same period.
  • During the last 3 years, the compounded annual growth rate (CAGR) is 5.7%, which is lower, thus worse than the value of 13.4% 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:
  • Compared with the benchmark GLD (13.8%) in the period of the last 5 years, the historical 30 days volatility of 9.7% of Leveraged Gold-Currency Strategy is smaller, thus better.
  • Looking at 30 days standard deviation in of 9.2% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (13.7%).

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 GLD (9.4%) in the period of the last 5 years, the downside deviation of 6.5% of Leveraged Gold-Currency Strategy is lower, thus better.
  • Compared with GLD (9.5%) in the period of the last 3 years, the downside deviation of 6.6% is lower, thus better.

Sharpe:

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Which means for our asset as example:
  • The Sharpe Ratio over 5 years of Leveraged Gold-Currency Strategy is 0.71, which is higher, thus better compared to the benchmark GLD (0.57) in the same period.
  • Compared with GLD (0.8) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.35 is smaller, thus worse.

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 (0.84) in the period of the last 5 years, the downside risk / excess return profile of 1.05 of Leveraged Gold-Currency Strategy is larger, thus better.
  • Compared with GLD (1.15) in the period of the last 3 years, the downside risk / excess return profile of 0.48 is smaller, thus worse.

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:
  • Compared with the benchmark GLD (7.03 ) in the period of the last 5 years, the Downside risk index of 3.11 of Leveraged Gold-Currency Strategy is smaller, thus better.
  • Compared with GLD (5.51 ) in the period of the last 3 years, the Downside risk index of 3.45 is lower, thus better.

MaxDD:

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Using this definition on our asset we see for example:
  • Compared with the benchmark GLD (-17.8 days) in the period of the last 5 years, the maximum DrawDown of -9.5 days of Leveraged Gold-Currency Strategy is higher, thus better.
  • Looking at maximum drop from peak to valley in of -9.5 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to GLD (-13.8 days).

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.'

Applying this definition to our asset in some examples:
  • The maximum time in days below previous high water mark over 5 years of Leveraged Gold-Currency Strategy is 181 days, which is lower, thus better compared to the benchmark GLD (741 days) in the same period.
  • Looking at maximum days below previous high in of 181 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (352 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.'

Applying this definition to our asset in some examples:
  • Looking at the average time in days below previous high water mark of 42 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 (241 days)
  • Looking at average days under water in of 52 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (101 days).

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 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.