Description of The Global Sector Rotation Strategy Aggressive version

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 of The Global Sector Rotation Strategy Aggressive version (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:
  • Compared with the benchmark SPY (66.1%) in the period of the last 5 years, the total return of 149.6% of The Global Sector Rotation Strategy Aggressive version is greater, thus better.
  • During the last 3 years, the total return, or performance is 112%, which is larger, thus better than the value of 46.2% from the benchmark.

CAGR:

'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.'

Applying this definition to our asset in some examples:
  • The annual return (CAGR) over 5 years of The Global Sector Rotation Strategy Aggressive version is 20.1%, which is higher, thus better compared to the benchmark SPY (10.7%) in the same period.
  • Looking at annual performance (CAGR) in of 28.5% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (13.5%).

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.'

Applying this definition to our asset in some examples:
  • Looking at the 30 days standard deviation of 20.3% in the last 5 years of The Global Sector Rotation Strategy Aggressive version, we see it is relatively higher, thus worse in comparison to the benchmark SPY (13.4%)
  • Compared with SPY (12.3%) in the period of the last 3 years, the volatility of 19% is greater, thus worse.

DownVol:

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. 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 (14.6%) in the period of the last 5 years, the downside volatility of 21.7% of The Global Sector Rotation Strategy Aggressive version is higher, thus worse.
  • Looking at downside risk in of 20.2% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (13.9%).

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.'

Which means for our asset as example:
  • Looking at the risk / return profile (Sharpe) of 0.87 in the last 5 years of The Global Sector Rotation Strategy Aggressive version, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.61)
  • Compared with SPY (0.9) in the period of the last 3 years, the Sharpe Ratio of 1.37 is greater, thus better.

Sortino:

'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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (0.56) in the period of the last 5 years, the ratio of annual return and downside deviation of 0.81 of The Global Sector Rotation Strategy Aggressive version is higher, thus better.
  • Looking at ratio of annual return and downside deviation in of 1.29 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.8).

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (3.99 ) in the period of the last 5 years, the Ulcer Ratio of 7.02 of The Global Sector Rotation Strategy Aggressive version is higher, thus worse.
  • Compared with SPY (4.04 ) in the period of the last 3 years, the Ulcer Index of 4.86 is greater, thus worse.

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 -21.1 days in the last 5 years of The Global Sector Rotation Strategy Aggressive version, we see it is relatively lower, thus worse in comparison to the benchmark SPY (-19.3 days)
  • Compared with SPY (-19.3 days) in the period of the last 3 years, the maximum DrawDown of -13.3 days is higher, thus better.

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:
  • Looking at the maximum days under water of 259 days in the last 5 years of The Global Sector Rotation Strategy Aggressive version, we see it is relatively higher, thus worse in comparison to the benchmark SPY (187 days)
  • During the last 3 years, the maximum days under water is 259 days, which is greater, thus worse than the value of 139 days from the benchmark.

AveDuration:

'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.'

Which means for our asset as example:
  • Looking at the average days below previous high of 68 days in the last 5 years of The Global Sector Rotation Strategy Aggressive version, we see it is relatively higher, thus worse in comparison to the benchmark SPY (41 days)
  • Looking at average time in days below previous high water mark in of 60 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (36 days).

Performance of The Global Sector Rotation Strategy Aggressive version (YTD)

Historical returns have been extended using synthetic data.

Allocations of The Global Sector Rotation Strategy Aggressive version
()

Allocations

Returns of The Global Sector Rotation Strategy Aggressive version (%)

  • "Year" returns in the table above are not equal to the sum of monthly returns due to compounding.
  • Performance results of The Global Sector Rotation Strategy Aggressive version 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.