Description

This is the aggressive version of the Global Sector Rotation Strategy and is used as a sub-strategy. It picks on a monthly basis the top two performing global sectors.

Methodology & Assets

EEM – iShares MSCI Emerging Markets
DBEM – Emerging Markets Equity Fund
EPP – iShares MSCI Pacific ex-Japan
DBAP – MSCI AC Asia Pacific ex Japan Hedged Equity Fund
FEZ – SPDR Euro STOXX 50
HEDJ – Europe Hedged Equity Fund
IHDG – WisdomTree Int’l Hedged Quality Divident ETF
MDY – S&P MidCap 400

From the HEDGE sub-strategy:
GLD – SPDR Gold Shares
TLT– iShares Barclays Long-Term Treasury (15-18yr)

From the Short Sectors sub-strategy:

SMN - ProShares UltraShort Basic Materials
ERY - Direxion Daily Energy Bear 3X ETF
SKF - ProShares UltraShort Financials
SIJ - ProShares UltraShort Industrial
REW - ProShares UltraShort Technolog
RXD - ProShares UltraShort Health Car
SCC - ProShares UltraShort Consumer Service
SDP - ProShares UltraShort Utilitie
SZK - ProShares UltraShort Consumer Goods

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:
  • Looking at the total return of 90.9% in the last 5 years of GSRS Aggressive Sub-strategy, we see it is relatively lower, thus worse in comparison to the benchmark SPY (121.2%)
  • During the last 3 years, the total return, or performance is 44.4%, which is smaller, thus worse than the value of 67.5% 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.'

Which means for our asset as example:
  • Looking at the compounded annual growth rate (CAGR) of 13.8% in the last 5 years of GSRS Aggressive Sub-strategy, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (17.2%)
  • During the last 3 years, the compounded annual growth rate (CAGR) is 13%, which is lower, thus worse than the value of 18.7% from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Looking at the historical 30 days volatility of 20% in the last 5 years of GSRS Aggressive Sub-strategy, we see it is relatively larger, thus worse in comparison to the benchmark SPY (18.7%)
  • During the last 3 years, the historical 30 days volatility is 23.2%, which is larger, thus worse than the value of 22.5% from the benchmark.

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 SPY (13.6%) in the period of the last 5 years, the downside deviation of 14.9% of GSRS Aggressive Sub-strategy is higher, thus worse.
  • During the last 3 years, the downside risk is 17.5%, which is greater, thus worse than the value of 16.3% from the benchmark.

Sharpe:

'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:
  • Looking at the ratio of return and volatility (Sharpe) of 0.56 in the last 5 years of GSRS Aggressive Sub-strategy, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (0.79)
  • During the last 3 years, the risk / return profile (Sharpe) is 0.45, which is lower, thus worse than the value of 0.72 from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (1.08) in the period of the last 5 years, the downside risk / excess return profile of 0.76 of GSRS Aggressive Sub-strategy is lower, thus worse.
  • Compared with SPY (1) in the period of the last 3 years, the ratio of annual return and downside deviation of 0.6 is smaller, thus worse.

Ulcer:

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Using this definition on our asset we see for example:
  • The Downside risk index over 5 years of GSRS Aggressive Sub-strategy is 11 , which is larger, thus worse compared to the benchmark SPY (5.59 ) in the same period.
  • Looking at Ulcer Ratio in of 14 in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (6.83 ).

MaxDD:

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Which means for our asset as example:
  • The maximum DrawDown over 5 years of GSRS Aggressive Sub-strategy is -44.6 days, which is smaller, thus worse compared to the benchmark SPY (-33.7 days) in the same period.
  • During the last 3 years, the maximum reduction from previous high is -44.6 days, which is smaller, thus worse than the value of -33.7 days from the benchmark.

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:
  • Compared with the benchmark SPY (139 days) in the period of the last 5 years, the maximum days below previous high of 234 days of GSRS Aggressive Sub-strategy is higher, thus worse.
  • Looking at maximum days below previous high in of 234 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (139 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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (33 days) in the period of the last 5 years, the average days under water of 48 days of GSRS Aggressive Sub-strategy is higher, thus worse.
  • During the last 3 years, the average days under water is 57 days, which is higher, thus worse than the value of 35 days from the benchmark.

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 GSRS Aggressive Sub-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.