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, 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, or increase in value over 5 years of Hedge Strategy 2x Leverage is 69.3%, which is higher, thus better compared to the benchmark AGG (17%) in the same period.
  • During the last 3 years, the total return, or increase in value is 58.3%, which is greater, thus better than the value of 12.2% from the benchmark.

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:
  • The compounded annual growth rate (CAGR) over 5 years of Hedge Strategy 2x Leverage is 11.1%, which is larger, thus better compared to the benchmark AGG (3.2%) in the same period.
  • Looking at compounded annual growth rate (CAGR) in of 16.5% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to AGG (3.9%).

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:
  • Compared with the benchmark AGG (4.7%) in the period of the last 5 years, the volatility of 22.4% of Hedge Strategy 2x Leverage is larger, thus worse.
  • Compared with AGG (5.6%) in the period of the last 3 years, the historical 30 days volatility of 25.8% is higher, thus worse.

DownVol:

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

Using this definition on our asset we see for example:
  • Compared with the benchmark AGG (3.5%) in the period of the last 5 years, the downside deviation of 15.8% of Hedge Strategy 2x Leverage is larger, thus worse.
  • Looking at downside deviation in of 18.3% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to AGG (4.3%).

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:
  • Looking at the Sharpe Ratio of 0.38 in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively higher, thus better in comparison to the benchmark AGG (0.15)
  • Compared with AGG (0.25) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.54 is higher, 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark AGG (0.19) in the period of the last 5 years, the excess return divided by the downside deviation of 0.55 of Hedge Strategy 2x Leverage is greater, thus better.
  • Looking at excess return divided by the downside deviation in of 0.77 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to AGG (0.33).

Ulcer:

'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:
  • Looking at the Ulcer Ratio of 16 in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively larger, thus worse in comparison to the benchmark AGG (1.67 )
  • Compared with AGG (1.69 ) in the period of the last 3 years, the Downside risk index of 17 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.'

Which means for our asset as example:
  • Compared with the benchmark AGG (-9.6 days) in the period of the last 5 years, the maximum DrawDown of -35.7 days of Hedge Strategy 2x Leverage is lower, thus worse.
  • Looking at maximum drop from peak to valley in of -35.7 days in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to AGG (-9.6 days).

MaxDuration:

'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.'

Which means for our asset as example:
  • Looking at the maximum time in days below previous high water mark of 446 days in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively larger, thus worse in comparison to the benchmark AGG (372 days)
  • During the last 3 years, the maximum days under water is 370 days, which is lower, thus better than the value of 372 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.'

Using this definition on our asset we see for example:
  • Looking at the average days under water of 150 days in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively larger, thus worse in comparison to the benchmark AGG (116 days)
  • Looking at average days below previous high in of 113 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to AGG (113 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, 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.