Description

This sub-strategy looks at two components and chooses the most appropriate one: A Treasury and a GLD-USD sub-strategy. The addition of gold provides an option for prolonged inflationary environments that could place bonds in a multi-year bear market.

This 2x leveraged version uses:

  • UBT ProShares Ultra 20+ Year Treasury
  • UGL ProShares Ultra Gold

The equity/bond pair is interesting because most of the time these two asset classes profit from an inverse correlation. If there is a real stock market correction, money typically flows towards treasuries and gold rewarding holders and providing crash protection. 

Statistics (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:
  • Compared with the benchmark AGG (-2.1%) in the period of the last 5 years, the total return of 27.2% of Hedge Strategy 2x Leverage is larger, thus better.
  • Compared with AGG (12.9%) in the period of the last 3 years, the total return, or performance of 38.1% is higher, thus better.

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:
  • Looking at the compounded annual growth rate (CAGR) of 5% in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively greater, thus better in comparison to the benchmark AGG (-0.4%)
  • Looking at annual return (CAGR) in of 11.4% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (4.2%).

Volatility:

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Using this definition on our asset we see for example:
  • The historical 30 days volatility over 5 years of Hedge Strategy 2x Leverage is 14.1%, which is higher, thus worse compared to the benchmark AGG (6.1%) in the same period.
  • Looking at historical 30 days volatility in of 14.2% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to AGG (6.5%).

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark AGG (4.3%) in the period of the last 5 years, the downside deviation of 9.8% of Hedge Strategy 2x Leverage is higher, thus worse.
  • Looking at downside risk in of 9.6% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to AGG (4.4%).

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark AGG (-0.48) in the period of the last 5 years, the Sharpe Ratio of 0.17 of Hedge Strategy 2x Leverage is higher, thus better.
  • Looking at Sharpe Ratio in of 0.63 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (0.25).

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.'

Which means for our asset as example:
  • Looking at the excess return divided by the downside deviation of 0.25 in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively higher, thus better in comparison to the benchmark AGG (-0.68)
  • During the last 3 years, the excess return divided by the downside deviation is 0.93, which is greater, thus better than the value of 0.38 from the benchmark.

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:
  • The Downside risk index over 5 years of Hedge Strategy 2x Leverage is 11 , which is greater, thus worse compared to the benchmark AGG (9.23 ) in the same period.
  • Looking at Ulcer Index in of 8.91 in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to AGG (2.45 ).

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:
  • Looking at the maximum DrawDown of -22.9 days in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively lower, thus worse in comparison to the benchmark AGG (-18.1 days)
  • Looking at maximum DrawDown in of -19.1 days in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to AGG (-7.4 days).

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:
  • The maximum days under water over 5 years of Hedge Strategy 2x Leverage is 500 days, which is smaller, thus better compared to the benchmark AGG (1182 days) in the same period.
  • Looking at maximum time in days below previous high water mark in of 251 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to AGG (195 days).

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.'

Using this definition on our asset we see for example:
  • The average days under water over 5 years of Hedge Strategy 2x Leverage is 151 days, which is lower, thus better compared to the benchmark AGG (560 days) in the same period.
  • Looking at average time in days below previous high water mark in of 66 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to AGG (62 days).

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

Allocations

Returns (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of Hedge Strategy 2x Leverage are hypothetical and do not account for slippage, fees or taxes.
  • Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.