This is the low volatility 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.

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

'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Which means for our asset as example:- The total return over 5 years of GSRS Low Volatility Sub-strategy is 76.9%, which is smaller, thus worse compared to the benchmark SPY (80.4%) in the same period.
- Compared with SPY (30.7%) in the period of the last 3 years, the total return, or increase in value of 13.3% is lower, thus worse.

'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:- Compared with the benchmark SPY (12.6%) in the period of the last 5 years, the annual performance (CAGR) of 12.1% of GSRS Low Volatility Sub-strategy is lower, thus worse.
- Compared with SPY (9.4%) in the period of the last 3 years, the annual return (CAGR) of 4.3% is smaller, thus worse.

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (21.3%) in the period of the last 5 years, the historical 30 days volatility of 16.4% of GSRS Low Volatility Sub-strategy is smaller, thus better.
- During the last 3 years, the historical 30 days volatility is 12.4%, which is smaller, thus better than the value of 17.6% from the benchmark.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Which means for our asset as example:- Compared with the benchmark SPY (15.3%) in the period of the last 5 years, the downside volatility of 11.9% of GSRS Low Volatility Sub-strategy is smaller, thus better.
- Looking at downside volatility in of 8.9% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (12.3%).

'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:- Compared with the benchmark SPY (0.47) in the period of the last 5 years, the risk / return profile (Sharpe) of 0.59 of GSRS Low Volatility Sub-strategy is greater, thus better.
- During the last 3 years, the ratio of return and volatility (Sharpe) is 0.14, which is smaller, thus worse than the value of 0.39 from the benchmark.

'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:- The excess return divided by the downside deviation over 5 years of GSRS Low Volatility Sub-strategy is 0.81, which is greater, thus better compared to the benchmark SPY (0.66) in the same period.
- Looking at downside risk / excess return profile in of 0.2 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.56).

'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.'

Which means for our asset as example:- The Ulcer Index over 5 years of GSRS Low Volatility Sub-strategy is 6.49 , which is lower, thus better compared to the benchmark SPY (9.43 ) in the same period.
- Compared with SPY (10 ) in the period of the last 3 years, the Ulcer Ratio of 6.94 is lower, thus better.

'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:- Looking at the maximum drop from peak to valley of -33 days in the last 5 years of GSRS Low Volatility Sub-strategy, we see it is relatively larger, thus better in comparison to the benchmark SPY (-33.7 days)
- During the last 3 years, the maximum DrawDown is -19.9 days, which is larger, thus better than the value of -24.5 days from the benchmark.

'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:- Looking at the maximum time in days below previous high water mark of 412 days in the last 5 years of GSRS Low Volatility Sub-strategy, we see it is relatively lower, thus better in comparison to the benchmark SPY (479 days)
- Compared with SPY (479 days) in the period of the last 3 years, the maximum days below previous high of 412 days is lower, thus better.

'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.'

Applying this definition to our asset in some examples:- The average days under water over 5 years of GSRS Low Volatility Sub-strategy is 96 days, which is smaller, thus better compared to the benchmark SPY (119 days) in the same period.
- During the last 3 years, the average time in days below previous high water mark is 139 days, which is lower, thus better than the value of 173 days from the benchmark.

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of GSRS Low Volatility 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.