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:
  • The total return, or performance over 5 years of The Global Sector Rotation Strategy Aggressive version is 87.8%, which is larger, thus better compared to the benchmark SPY (80.9%) in the same period.
  • Looking at total return, or increase in value in of 54.1% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (54.7%).

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.'

Applying this definition to our asset in some examples:
  • Looking at the annual return (CAGR) of 13.4% in the last 5 years of The Global Sector Rotation Strategy Aggressive version, we see it is relatively larger, thus better in comparison to the benchmark SPY (12.6%)
  • Looking at annual return (CAGR) in of 15.5% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (15.7%).

Volatility:

'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.'

Applying this definition to our asset in some examples:
  • Looking at the historical 30 days volatility of 13.7% in the last 5 years of The Global Sector Rotation Strategy Aggressive version, we see it is relatively larger, thus worse in comparison to the benchmark SPY (13.3%)
  • During the last 3 years, the 30 days standard deviation is 12.9%, which is greater, thus worse than the value of 12.8% from the benchmark.

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 (14.8%) in the period of the last 5 years, the downside deviation of 15% of The Global Sector Rotation Strategy Aggressive version is larger, thus worse.
  • Looking at downside volatility in of 14.3% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (14.8%).

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:
  • The risk / return profile (Sharpe) over 5 years of The Global Sector Rotation Strategy Aggressive version is 0.8, which is greater, thus better compared to the benchmark SPY (0.76) in the same period.
  • Looking at risk / return profile (Sharpe) in of 1.01 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (1.03).

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:
  • Compared with the benchmark SPY (0.68) in the period of the last 5 years, the excess return divided by the downside deviation of 0.73 of The Global Sector Rotation Strategy Aggressive version is higher, thus better.
  • During the last 3 years, the excess return divided by the downside deviation is 0.91, which is greater, thus better than the value of 0.89 from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (3.97 ) in the period of the last 5 years, the Ulcer Ratio of 3.92 of The Global Sector Rotation Strategy Aggressive version is lower, thus better.
  • Looking at Ulcer Index in of 3.07 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (4.1 ).

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (-19.3 days) in the period of the last 5 years, the maximum DrawDown of -13.9 days of The Global Sector Rotation Strategy Aggressive version is greater, thus better.
  • Compared with SPY (-19.3 days) in the period of the last 3 years, the maximum reduction from previous high of -9.2 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:
  • Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum days under water of 235 days of The Global Sector Rotation Strategy Aggressive version is larger, thus worse.
  • Looking at maximum days under water in of 115 days in the period of the last 3 years, we see it is relatively lower, thus better 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.'

Applying this definition to our asset in some examples:
  • Looking at the average time in days below previous high water mark of 48 days in the last 5 years of The Global Sector Rotation Strategy Aggressive version, we see it is relatively larger, thus worse in comparison to the benchmark SPY (42 days)
  • During the last 3 years, the average days below previous high is 27 days, which is smaller, thus better than the value of 37 days from the benchmark.

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
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Allocations

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

  • Note that yearly returns do not equal 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.