The Global Market Rotation Strategy is one of our core investment strategies. The strategy invests on a monthly basis in one of five broad global markets. It hedges the global equity exposure with variable allocation to the HEDGE sub-strategy.

December 2016 Update: We are enhancing the Treasury hedge. Before we allocated part of the portfolio to longer-term treasuries, namely the 3x leveraged ETF version, TMF. From now on we will be allocating to the best bond ETF as chosen by our Bond Rotation strategy (BRS). BRS choses from the JNK, CWB,PCY and TLT ETFs.

December 2015 Update: We are adding currency hedged ETFs in the universe that our algorithm can see. That means that we allow our algorithms to choose between a non-hedged ETF like EWG or a hedged ETF like HEWG. This allows our algorithm to input dollar strength as an additional parameter and be able to respond accordingly. This does not change the current logic, which is to bet on the best performing regions or countries. What it does is that it allows, in the case of extended dollar strength, to partially neutralize foreign currency risk for our U.S. based investors.

'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:- The total return, or increase in value over 5 years of Global Market Rotation Strategy is 83.2%, which is lower, thus worse compared to the benchmark ACWI (94.2%) in the same period.
- Looking at total return, or performance in of 40.5% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to ACWI (47.5%).

'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:- The compounded annual growth rate (CAGR) over 5 years of Global Market Rotation Strategy is 12.9%, which is lower, thus worse compared to the benchmark ACWI (14.2%) in the same period.
- Looking at annual return (CAGR) in of 12% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to ACWI (13.9%).

'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:- Looking at the 30 days standard deviation of 10.5% in the last 5 years of Global Market Rotation Strategy, we see it is relatively smaller, thus better in comparison to the benchmark ACWI (17.9%)
- Compared with ACWI (21.5%) in the period of the last 3 years, the volatility of 12.3% is lower, thus better.

'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:- Looking at the downside risk of 7.8% in the last 5 years of Global Market Rotation Strategy, we see it is relatively lower, thus better in comparison to the benchmark ACWI (13.2%)
- Compared with ACWI (15.9%) in the period of the last 3 years, the downside risk of 9.3% is lower, thus better.

'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:- Compared with the benchmark ACWI (0.66) in the period of the last 5 years, the risk / return profile (Sharpe) of 0.99 of Global Market Rotation Strategy is larger, thus better.
- During the last 3 years, the ratio of return and volatility (Sharpe) is 0.77, which is greater, thus better than the value of 0.53 from the benchmark.

'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.'

Applying this definition to our asset in some examples:- The excess return divided by the downside deviation over 5 years of Global Market Rotation Strategy is 1.33, which is greater, thus better compared to the benchmark ACWI (0.89) in the same period.
- Compared with ACWI (0.71) in the period of the last 3 years, the ratio of annual return and downside deviation of 1.03 is greater, thus better.

'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:- Compared with the benchmark ACWI (6.26 ) in the period of the last 5 years, the Ulcer Ratio of 2.82 of Global Market Rotation Strategy is lower, thus better.
- Compared with ACWI (7.08 ) in the period of the last 3 years, the Ulcer Index of 3.53 is smaller, thus better.

'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.'

Which means for our asset as example:- Looking at the maximum drop from peak to valley of -20.7 days in the last 5 years of Global Market Rotation Strategy, we see it is relatively greater, thus better in comparison to the benchmark ACWI (-33.5 days)
- During the last 3 years, the maximum drop from peak to valley is -20.7 days, which is higher, thus better than the value of -33.5 days from the benchmark.

'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). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Which means for our asset as example:- Compared with the benchmark ACWI (373 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 94 days of Global Market Rotation Strategy is smaller, thus better.
- Compared with ACWI (138 days) in the period of the last 3 years, the maximum days under water of 94 days is lower, thus better.

'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.'

Using this definition on our asset we see for example:- Looking at the average days under water of 19 days in the last 5 years of Global Market Rotation Strategy, we see it is relatively lower, thus better in comparison to the benchmark ACWI (81 days)
- During the last 3 years, the average days under water is 21 days, which is smaller, thus better than the value of 37 days from the benchmark.

Historical returns have been extended using synthetic data.
[Show Details]

Allocations and holdings shown below are delayed by one month. To see current trading allocations of Global Market Rotation Strategy, register now.

()

- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of Global Market Rotation 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.