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 (-3.3%) in the period of the last 5 years, the total return of 82.5% of Leveraged Gold-Currency Strategy is greater, thus better.
  • During the last 3 years, the total return, or performance is 31.6%, which is larger, thus better than the value of 3.2% from the benchmark.

CAGR:

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark GLD (-0.7%) in the period of the last 5 years, the annual return (CAGR) of 12.8% of Leveraged Gold-Currency Strategy is higher, thus better.
  • Looking at annual performance (CAGR) in of 9.6% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to GLD (1.1%).

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:
  • The volatility over 5 years of Leveraged Gold-Currency Strategy is 12%, which is smaller, thus better compared to the benchmark GLD (13%) in the same period.
  • During the last 3 years, the 30 days standard deviation is 8.5%, which is smaller, thus better than the value of 11.4% 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 risk of 11.7% 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%)
  • Looking at downside deviation in of 8.4% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to GLD (11.6%).

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.'

Which means for our asset as example:
  • Compared with the benchmark GLD (-0.24) in the period of the last 5 years, the Sharpe Ratio of 0.86 of Leveraged Gold-Currency Strategy is greater, thus better.
  • During the last 3 years, the risk / return profile (Sharpe) is 0.84, which is higher, thus better than the value of -0.13 from the benchmark.

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 (-0.25) in the period of the last 5 years, the downside risk / excess return profile of 0.88 of Leveraged Gold-Currency Strategy is greater, thus better.
  • Looking at excess return divided by the downside deviation in of 0.84 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to GLD (-0.12).

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:
  • The Ulcer Ratio over 5 years of Leveraged Gold-Currency Strategy is 4.02 , which is smaller, thus worse compared to the benchmark GLD (9.94 ) in the same period.
  • Compared with GLD (8.13 ) in the period of the last 3 years, the Downside risk index of 2.87 is lower, thus worse.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark GLD (-22 days) in the period of the last 5 years, the maximum DrawDown of -10.3 days of Leveraged Gold-Currency Strategy is greater, thus better.
  • Looking at maximum DrawDown in of -9.2 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to GLD (-17.8 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.'

Using this definition on our asset we see for example:
  • Looking at the maximum days below previous high of 172 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 (679 days)
  • Looking at maximum days below previous high in of 149 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to GLD (679 days).

AveDuration:

'The Average 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. 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.'

Using this definition on our asset we see for example:
  • The average days below previous high over 5 years of Leveraged Gold-Currency Strategy is 40 days, which is lower, thus better compared to the benchmark GLD (286 days) in the same period.
  • Compared with GLD (311 days) in the period of the last 3 years, the average days below previous high of 35 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.