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.'

Applying this definition to our asset in some examples:
  • Looking at the total return, or increase in value of 150.9% 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 (66%)
  • Looking at total return in of 111.9% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (45.6%).

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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (10.7%) in the period of the last 5 years, the annual return (CAGR) of 20.2% of The Global Sector Rotation Strategy Aggressive version is greater, thus better.
  • During the last 3 years, the annual performance (CAGR) is 28.4%, which is larger, thus better than the value of 13.3% from the benchmark.

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 20.3% 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 (13.4%)
  • During the last 3 years, the 30 days standard deviation is 19%, which is larger, thus worse than the value of 12.3% 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.'

Which means for our asset as 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 (14.6%) in the same period.
  • Compared with SPY (13.8%) in the period of the last 3 years, the downside deviation of 20.2% is higher, thus worse.

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:
  • The risk / return profile (Sharpe) over 5 years of The Global Sector Rotation Strategy Aggressive version is 0.87, which is greater, thus better compared to the benchmark SPY (0.61) in the same period.
  • During the last 3 years, the Sharpe Ratio is 1.36, which is larger, thus better than the value of 0.88 from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • The ratio of annual return and downside deviation over 5 years of The Global Sector Rotation Strategy Aggressive version is 0.82, which is higher, thus better compared to the benchmark SPY (0.56) in the same period.
  • Compared with SPY (0.78) in the period of the last 3 years, the excess return divided by the downside deviation of 1.28 is larger, thus better.

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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (3.99 ) in the period of the last 5 years, the Ulcer Ratio of 7.01 of The Global Sector Rotation Strategy Aggressive version is higher, thus worse.
  • Looking at Downside risk index in of 4.85 in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (4.04 ).

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 reduction from previous high of -21.1 days of The Global Sector Rotation Strategy Aggressive version is lower, thus worse.
  • During the last 3 years, the maximum DrawDown is -13.3 days, which is higher, thus better than the value of -19.3 days from the benchmark.

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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum days below previous high of 259 days of The Global Sector Rotation Strategy Aggressive version is larger, thus worse.
  • During the last 3 years, the maximum days below previous high is 259 days, which is larger, 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 greater, thus worse in comparison to the benchmark SPY (41 days)
  • During the last 3 years, the average time in days below previous high water mark is 59 days, which is larger, thus worse than the value of 36 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.