Description of The Global Sector Rotation Strategy unhedged

This is the undhedged 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.

Statistics of The Global Sector Rotation Strategy unhedged (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:
  • The total return over 5 years of The Global Sector Rotation Strategy unhedged is 92.2%, which is larger, thus better compared to the benchmark SPY (68.7%) in the same period.
  • Compared with SPY (47.9%) in the period of the last 3 years, the total return, or performance of 70.2% is larger, thus better.

CAGR:

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (11%) in the period of the last 5 years, the annual return (CAGR) of 14% of The Global Sector Rotation Strategy unhedged is higher, thus better.
  • Looking at compounded annual growth rate (CAGR) in of 19.4% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (14%).

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.'

Using this definition on our asset we see for example:
  • The historical 30 days volatility over 5 years of The Global Sector Rotation Strategy unhedged is 13.4%, which is greater, thus worse compared to the benchmark SPY (13.3%) in the same period.
  • During the last 3 years, the volatility is 12.5%, which is greater, thus worse than the value of 12.5% 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.'

Applying this definition to our asset in some examples:
  • Looking at the downside risk of 14.7% in the last 5 years of The Global Sector Rotation Strategy unhedged, we see it is relatively greater, thus worse in comparison to the benchmark SPY (14.6%)
  • Compared with SPY (14.2%) in the period of the last 3 years, the downside deviation of 14.1% is lower, thus better.

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 ratio of return and volatility (Sharpe) over 5 years of The Global Sector Rotation Strategy unhedged is 0.85, which is larger, thus better compared to the benchmark SPY (0.64) in the same period.
  • During the last 3 years, the ratio of return and volatility (Sharpe) is 1.36, which is larger, thus better than the value of 0.91 from the benchmark.

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:
  • The downside risk / excess return profile over 5 years of The Global Sector Rotation Strategy unhedged is 0.78, which is larger, thus better compared to the benchmark SPY (0.58) in the same period.
  • Compared with SPY (0.81) in the period of the last 3 years, the excess return divided by the downside deviation of 1.2 is larger, thus better.

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.'

Using this definition on our asset we see for example:
  • Looking at the Ulcer Index of 5.23 in the last 5 years of The Global Sector Rotation Strategy unhedged, we see it is relatively larger, thus better in comparison to the benchmark SPY (3.96 )
  • During the last 3 years, the Ulcer Ratio is 5.59 , which is higher, thus better than the value of 4.01 from the benchmark.

MaxDD:

'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.'

Using this definition on our asset we see for example:
  • The maximum DrawDown over 5 years of The Global Sector Rotation Strategy unhedged is -14.2 days, which is larger, thus better compared to the benchmark SPY (-19.3 days) in the same period.
  • Compared with SPY (-19.3 days) in the period of the last 3 years, the maximum reduction from previous high of -14.2 days is greater, 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.'

Applying this definition to our asset in some examples:
  • The maximum days under water over 5 years of The Global Sector Rotation Strategy unhedged is 281 days, which is greater, thus worse compared to the benchmark SPY (187 days) in the same period.
  • During the last 3 years, the maximum days below previous high is 281 days, which is larger, thus worse than the value of 139 days from the benchmark.

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 days below previous high of 73 days in the last 5 years of The Global Sector Rotation Strategy unhedged, we see it is relatively higher, thus worse in comparison to the benchmark SPY (41 days)
  • Compared with SPY (36 days) in the period of the last 3 years, the average days below previous high of 68 days is higher, thus worse.

Performance of The Global Sector Rotation Strategy unhedged (YTD)

Historical returns have been extended using synthetic data.

Allocations of The Global Sector Rotation Strategy unhedged
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Allocations

Returns of The Global Sector Rotation Strategy unhedged (%)

  • "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 unhedged 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.