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:

'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:
  • Compared with the benchmark SPY (71.7%) in the period of the last 5 years, the total return of 165% of The Global Sector Rotation Strategy Aggressive version is greater, thus better.
  • Looking at total return, or increase in value in of 79.2% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (45.2%).

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (11.4%) in the period of the last 5 years, the annual return (CAGR) of 21.5% of The Global Sector Rotation Strategy Aggressive version is greater, thus better.
  • During the last 3 years, the compounded annual growth rate (CAGR) is 21.5%, which is larger, thus better than the value of 13.2% from the benchmark.

Volatility:

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Using this definition on our asset we see for example:
  • Looking at the volatility of 20.1% 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 (13.6%)
  • Looking at historical 30 days volatility in of 18.3% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (12.9%).

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:
  • The downside volatility over 5 years of The Global Sector Rotation Strategy Aggressive version is 21.7%, which is larger, thus worse compared to the benchmark SPY (14.9%) in the same period.
  • Compared with SPY (14.6%) in the period of the last 3 years, the downside risk of 19.3% is higher, thus worse.

Sharpe:

'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:
  • Looking at the ratio of return and volatility (Sharpe) of 0.94 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 (0.66)
  • Compared with SPY (0.83) in the period of the last 3 years, the risk / return profile (Sharpe) of 1.04 is larger, 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 (0.6) in the period of the last 5 years, the excess return divided by the downside deviation of 0.88 of The Global Sector Rotation Strategy Aggressive version is larger, thus better.
  • Looking at ratio of annual return and downside deviation in of 0.98 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.74).

Ulcer:

'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 Downside risk index of 6.57 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 (3.99 )
  • Compared with SPY (4.1 ) in the period of the last 3 years, the Downside risk index of 4.93 is higher, thus worse.

MaxDD:

'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.'

Applying this definition to our asset in some examples:
  • Looking at the maximum DrawDown of -20.1 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 drop from peak to valley 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). 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'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum days below previous high of 221 days of The Global Sector Rotation Strategy Aggressive version is greater, thus worse.
  • Looking at maximum days under water in of 221 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.'

Applying this definition to our asset in some examples:
  • The average time in days below previous high water mark over 5 years of The Global Sector Rotation Strategy Aggressive version is 58 days, which is higher, thus worse compared to the benchmark SPY (41 days) in the same period.
  • During the last 3 years, the average time in days below previous high water mark is 55 days, which is larger, thus worse than the value of 35 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 (%)

  • "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.