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:

'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.'

Applying this definition to our asset in some examples:
  • The total return over 5 years of Gold-Currency Strategy II is 39.8%, which is lower, thus worse compared to the benchmark GLD (40.5%) in the same period.
  • During the last 3 years, the total return, or performance is 27.8%, which is larger, thus better than the value of 21% from the benchmark.

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:
  • Compared with the benchmark GLD (7%) in the period of the last 5 years, the annual performance (CAGR) of 6.9% of Gold-Currency Strategy II is lower, thus worse.
  • Compared with GLD (6.5%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 8.5% is greater, thus better.

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:
  • Looking at the 30 days standard deviation of 8.7% in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (14.3%)
  • Compared with GLD (16.2%) in the period of the last 3 years, the 30 days standard deviation of 9.1% 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 deviation of 6.4% in the last 5 years of Gold-Currency Strategy II, we see it is relatively smaller, thus better in comparison to the benchmark GLD (10.2%)
  • During the last 3 years, the downside risk is 6.9%, which is smaller, thus better than the value of 11.7% 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.'

Using this definition on our asset we see for example:
  • The risk / return profile (Sharpe) over 5 years of Gold-Currency Strategy II is 0.51, which is greater, thus better compared to the benchmark GLD (0.32) in the same period.
  • Looking at risk / return profile (Sharpe) in of 0.66 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to GLD (0.25).

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 downside risk / excess return profile of 0.69 in the last 5 years of Gold-Currency Strategy II, we see it is relatively higher, thus better in comparison to the benchmark GLD (0.45)
  • Compared with GLD (0.35) in the period of the last 3 years, the excess return divided by the downside deviation of 0.86 is higher, 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:
  • The Ulcer Ratio over 5 years of Gold-Currency Strategy II is 4.82 , which is smaller, thus better compared to the benchmark GLD (9.81 ) in the same period.
  • Compared with GLD (12 ) in the period of the last 3 years, the Downside risk index of 5.84 is lower, thus better.

MaxDD:

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Using this definition on our asset we see for example:
  • Looking at the maximum drop from peak to valley of -9.9 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)
  • Looking at maximum reduction from previous high in of -9.9 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to GLD (-22 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:
  • The maximum days below previous high over 5 years of Gold-Currency Strategy II is 396 days, which is lower, thus better compared to the benchmark GLD (590 days) in the same period.
  • Compared with GLD (590 days) in the period of the last 3 years, the maximum days under water of 396 days is lower, 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.'

Which means for our asset as example:
  • Looking at the average time in days below previous high water mark of 119 days in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (204 days)
  • Compared with GLD (250 days) in the period of the last 3 years, the average time in days below previous high water mark of 142 days is lower, thus better.

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, 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.