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.

'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.'

Which means for our asset as example:- The total return, or increase in value over 5 years of Gold-Currency Strategy II is 22.8%, which is larger, thus better compared to the benchmark GLD (19.7%) in the same period.
- During the last 3 years, the total return, or increase in value is 9.5%, which is smaller, thus worse than the value of 12.5% from the benchmark.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark GLD (3.7%) in the period of the last 5 years, the annual return (CAGR) of 4.2% of Gold-Currency Strategy II is higher, thus better.
- Looking at annual performance (CAGR) in of 3.1% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to GLD (4%).

'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.'

Which means for our asset as example:- Compared with the benchmark GLD (13.1%) in the period of the last 5 years, the historical 30 days volatility of 8.3% of Gold-Currency Strategy II is lower, thus better.
- Looking at historical 30 days volatility in of 6.6% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to GLD (10.8%).

'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.'

Which means for our asset as example:- The downside volatility over 5 years of Gold-Currency Strategy II is 9.2%, which is lower, thus better compared to the benchmark GLD (13%) in the same period.
- During the last 3 years, the downside risk is 8.5%, which is smaller, thus better than the value of 11.3% from the benchmark.

'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.'

Which means for our asset as example:- The Sharpe Ratio over 5 years of Gold-Currency Strategy II is 0.2, which is larger, thus better compared to the benchmark GLD (0.09) in the same period.
- Looking at risk / return profile (Sharpe) in of 0.09 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to GLD (0.14).

'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 (0.09) in the period of the last 5 years, the excess return divided by the downside deviation of 0.19 of Gold-Currency Strategy II is larger, thus better.
- During the last 3 years, the downside risk / excess return profile is 0.07, which is lower, thus worse than the value of 0.13 from the benchmark.

'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.'

Which means for our asset as example:- Looking at the Ulcer Index of 4.41 in the last 5 years of Gold-Currency Strategy II, we see it is relatively lower, thus better in comparison to the benchmark GLD (8.83 )
- Looking at Downside risk index in of 3.01 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to GLD (6.92 ).

'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:- The maximum drop from peak to valley over 5 years of Gold-Currency Strategy II is -10.1 days, which is larger, thus better compared to the benchmark GLD (-19.7 days) in the same period.
- Looking at maximum drop from peak to valley in of -7.2 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to GLD (-15.9 days).

'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.'

Which means for our asset as example:- The maximum days under water over 5 years of Gold-Currency Strategy II is 605 days, which is smaller, thus better compared to the benchmark GLD (741 days) in the same period.
- Looking at maximum days under water 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).

'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:- The average time in days below previous high water mark over 5 years of Gold-Currency Strategy II is 187 days, which is smaller, thus better compared to the benchmark GLD (279 days) in the same period.
- During the last 3 years, the average time in days below previous high water mark is 100 days, which is lower, thus better than the value of 131 days from the benchmark.

Historical returns have been extended using synthetic data.
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- "Year" returns in the table above are not equal to 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.