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:

'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 50.1% in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively lower, thus worse in comparison to the benchmark GLD (64.8%)
  • Compared with GLD (37.6%) in the period of the last 3 years, the total return, or performance of 8.6% is lower, thus worse.

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 (10.5%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 8.5% of Leveraged Gold-Currency Strategy is lower, thus worse.
  • Looking at compounded annual growth rate (CAGR) in of 2.8% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (11.2%).

Volatility:

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Applying this definition to our asset in some examples:
  • The volatility over 5 years of Leveraged Gold-Currency Strategy is 9.6%, which is lower, thus better compared to the benchmark GLD (14%) in the same period.
  • Compared with GLD (14.5%) in the period of the last 3 years, the historical 30 days volatility of 9.3% is lower, thus better.

DownVol:

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Which means for our asset as example:
  • Looking at the downside volatility of 6.4% in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively lower, thus better in comparison to the benchmark GLD (9.7%)
  • During the last 3 years, the downside volatility is 6.8%, which is lower, thus better than the value of 10.3% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • The Sharpe Ratio over 5 years of Leveraged Gold-Currency Strategy is 0.62, which is higher, thus better compared to the benchmark GLD (0.57) in the same period.
  • Looking at risk / return profile (Sharpe) in of 0.03 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (0.6).

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.'

Using this definition on our asset we see for example:
  • Looking at the ratio of annual return and downside deviation of 0.92 in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively larger, thus better in comparison to the benchmark GLD (0.83)
  • Compared with GLD (0.85) in the period of the last 3 years, the downside risk / excess return profile of 0.04 is lower, 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.'

Using this definition on our asset we see for example:
  • The Ulcer Ratio over 5 years of Leveraged Gold-Currency Strategy is 3.37 , which is lower, thus better compared to the benchmark GLD (7.13 ) in the same period.
  • Compared with GLD (6.24 ) in the period of the last 3 years, the Ulcer Index of 4.02 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.'

Which means for our asset as example:
  • Looking at the maximum DrawDown of -9.7 days in the last 5 years of Leveraged Gold-Currency Strategy, we see it is relatively greater, thus better in comparison to the benchmark GLD (-17.8 days)
  • Looking at maximum reduction from previous high in of -9.7 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to GLD (-14 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.'

Which means for our asset as example:
  • 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.
  • Compared with GLD (352 days) in the period of the last 3 years, the maximum days below previous high of 181 days is lower, thus better.

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.'

Which means for our asset as example:
  • Compared with the benchmark GLD (244 days) in the period of the last 5 years, the average days below previous high of 44 days of Leveraged Gold-Currency Strategy is lower, thus better.
  • Compared with GLD (106 days) in the period of the last 3 years, the average time in days below previous high water mark of 58 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 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.