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.'

Applying this definition to our asset in some examples:
  • Looking at the total return, or increase in value of 22.4% in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus worse in comparison to the benchmark GLD (31.5%)
  • Looking at total return, or increase in value in of 18.8% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (29.5%).

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:
  • The annual performance (CAGR) over 5 years of Gold-Currency Strategy II is 4.1%, which is lower, thus worse compared to the benchmark GLD (5.6%) in the same period.
  • Looking at compounded annual growth rate (CAGR) in of 5.9% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (9%).

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.'

Which means for our asset as example:
  • Compared with the benchmark GLD (12.3%) in the period of the last 5 years, the 30 days standard deviation of 8.2% of Gold-Currency Strategy II is lower, thus better.
  • Looking at historical 30 days volatility in of 7% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (10.4%).

DownVol:

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

Applying this definition to our asset in some examples:
  • Compared with the benchmark GLD (8.3%) in the period of the last 5 years, the downside deviation of 5.5% of Gold-Currency Strategy II is smaller, thus better.
  • During the last 3 years, the downside volatility is 4.7%, which is lower, thus better than the value of 7% from the benchmark.

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:
  • Compared with the benchmark GLD (0.25) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.2 of Gold-Currency Strategy II is lower, thus worse.
  • Compared with GLD (0.63) in the period of the last 3 years, the Sharpe Ratio of 0.49 is lower, thus worse.

Sortino:

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Using this definition on our asset we see for example:
  • The ratio of annual return and downside deviation over 5 years of Gold-Currency Strategy II is 0.3, which is smaller, thus worse compared to the benchmark GLD (0.38) in the same period.
  • During the last 3 years, the excess return divided by the downside deviation is 0.72, which is lower, thus worse than the value of 0.93 from the benchmark.

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 Gold-Currency Strategy II is 4.4 , which is smaller, thus better compared to the benchmark GLD (7.43 ) in the same period.
  • Looking at Ulcer Ratio in of 2.89 in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to GLD (5.55 ).

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 DrawDown of -10.1 days in the last 5 years of Gold-Currency Strategy II, we see it is relatively higher, thus better in comparison to the benchmark GLD (-17.8 days)
  • Compared with GLD (-13.8 days) in the period of the last 3 years, the maximum DrawDown of -6.4 days is larger, thus better.

MaxDuration:

'The Maximum 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. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Applying this definition to our asset in some examples:
  • Looking at the maximum time in days below previous high water mark of 605 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 (741 days)
  • Looking at maximum days below previous high in of 299 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to GLD (352 days).

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 time in days below previous high water mark over 5 years of Gold-Currency Strategy II is 184 days, which is lower, thus better compared to the benchmark GLD (245 days) in the same period.
  • Looking at average days below previous high in of 87 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (103 days).

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 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.