Description

The Gold-Currency Strategy II 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 strategy is an update to the original GLD-USD strategy that uses inverse leveraged ETFs which are not permitted in some retirement accounts.

Statistics (YTD)

What do these metrics mean? [Read More] [Hide]

TotalReturn:

'Total return is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Using this definition on our asset we see for example:
  • Compared with the benchmark GLD (79.8%) in the period of the last 5 years, the total return of 64.8% of Gold-Currency Strategy II is lower, thus worse.
  • Looking at total return, or performance in of 43.1% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (73.7%).

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark GLD (12.5%) in the period of the last 5 years, the annual return (CAGR) of 10.5% of Gold-Currency Strategy II is lower, thus worse.
  • During the last 3 years, the annual performance (CAGR) is 12.8%, which is smaller, thus worse than the value of 20.3% 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.'

Which means for our asset as example:
  • The 30 days standard deviation over 5 years of Gold-Currency Strategy II is 10.8%, which is smaller, thus better compared to the benchmark GLD (15.3%) in the same period.
  • Looking at volatility in of 11.5% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (15.3%).

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 (10.7%) in the period of the last 5 years, the downside volatility of 7.6% of Gold-Currency Strategy II is lower, thus better.
  • Looking at downside volatility in of 7.8% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (10.1%).

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.'

Applying this definition to our asset in some examples:
  • The risk / return profile (Sharpe) over 5 years of Gold-Currency Strategy II is 0.74, which is higher, thus better compared to the benchmark GLD (0.65) in the same period.
  • Looking at ratio of return and volatility (Sharpe) in of 0.89 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (1.16).

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.'

Which means for our asset as example:
  • Looking at the excess return divided by the downside deviation of 1.05 in the last 5 years of Gold-Currency Strategy II, we see it is relatively larger, thus better in comparison to the benchmark GLD (0.93)
  • Looking at downside risk / excess return profile in of 1.32 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (1.77).

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.'

Which means for our asset as example:
  • Compared with the benchmark GLD (9.76 ) in the period of the last 5 years, the Ulcer Ratio of 7.09 of Gold-Currency Strategy II is lower, thus better.
  • During the last 3 years, the Ulcer Ratio is 4.37 , which is lower, thus better than the value of 4.83 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:
  • Looking at the maximum drop from peak to valley of -13.8 days in the last 5 years of Gold-Currency Strategy II, we see it is relatively greater, thus better in comparison to the benchmark GLD (-22 days)
  • During the last 3 years, the maximum reduction from previous high is -9.3 days, which is greater, thus better than the value of -13.4 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.'

Applying this definition to our asset in some examples:
  • The maximum time in days below previous high water mark over 5 years of Gold-Currency Strategy II is 590 days, which is lower, thus better compared to the benchmark GLD (897 days) in the same period.
  • During the last 3 years, the maximum time in days below previous high water mark is 294 days, which is higher, thus worse than the value of 145 days from the benchmark.

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.'

Using this definition on our asset we see for example:
  • The average days under water over 5 years of Gold-Currency Strategy II is 216 days, which is lower, thus better compared to the benchmark GLD (348 days) in the same period.
  • During the last 3 years, the average time in days below previous high water mark is 77 days, which is higher, thus worse than the value of 40 days from the benchmark.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

Allocations

Returns (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of Gold-Currency Strategy II are hypothetical and do not account for slippage, fees or taxes.
  • Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.