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:
  • Compared with the benchmark GLD (4.7%) in the period of the last 5 years, the total return, or performance of 78% of Leveraged Gold-Currency Strategy is higher, thus better.
  • Compared with GLD (5.5%) in the period of the last 3 years, the total return, or increase in value of 18.7% 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.'

Which means for our asset as example:
  • Compared with the benchmark GLD (0.9%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 12.2% of Leveraged Gold-Currency Strategy is higher, thus better.
  • During the last 3 years, the annual return (CAGR) is 5.9%, which is higher, thus better than the value of 1.8% from the benchmark.

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.'

Using this definition on our asset we see for example:
  • The 30 days standard deviation over 5 years of Leveraged Gold-Currency Strategy is 10%, which is lower, thus better compared to the benchmark GLD (12.9%) in the same period.
  • During the last 3 years, the historical 30 days volatility is 7.4%, which is lower, thus better than the value of 10.5% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Looking at the downside volatility of 9.7% in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively smaller, thus better in comparison to the benchmark GLD (12.7%)
  • During the last 3 years, the downside deviation is 7.8%, which is lower, thus better than the value of 11% 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:
  • Compared with the benchmark GLD (-0.12) in the period of the last 5 years, the Sharpe Ratio of 0.98 of Leveraged Gold-Currency Strategy is greater, thus better.
  • Looking at ratio of return and volatility (Sharpe) in of 0.46 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to GLD (-0.07).

Sortino:

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark GLD (-0.12) in the period of the last 5 years, the downside risk / excess return profile of 1 of Leveraged Gold-Currency Strategy is larger, thus better.
  • Compared with GLD (-0.06) in the period of the last 3 years, the downside risk / excess return profile of 0.44 is larger, thus better.

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 (10 ) in the period of the last 5 years, the Ulcer Index of 3.49 of Leveraged Gold-Currency Strategy is lower, thus better.
  • During the last 3 years, the Ulcer Ratio is 3 , which is lower, thus better than the value of 8.3 from the benchmark.

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.'

Which means for our asset as example:
  • The maximum reduction from previous high over 5 years of Leveraged Gold-Currency Strategy is -10.1 days, which is larger, thus better compared to the benchmark GLD (-22 days) in the same period.
  • Compared with GLD (-17.8 days) in the period of the last 3 years, the maximum DrawDown of -9.2 days is larger, 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). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Applying this definition to our asset in some examples:
  • The maximum days below previous high over 5 years of Leveraged Gold-Currency Strategy is 172 days, which is lower, thus better compared to the benchmark GLD (741 days) in the same period.
  • Compared with GLD (741 days) in the period of the last 3 years, the maximum days under water of 149 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:
  • The average days under water over 5 years of Leveraged Gold-Currency Strategy is 40 days, which is smaller, thus better compared to the benchmark GLD (320 days) in the same period.
  • Compared with GLD (369 days) in the period of the last 3 years, the average days under water of 39 days is lower, 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.