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:

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Using this definition on our asset we see for example:
  • Compared with the benchmark AGG (3%) in the period of the last 5 years, the total return of 15.7% of Hedge Strategy 2x Leverage is higher, thus better.
  • Compared with AGG (-3.9%) in the period of the last 3 years, the total return, or performance of 1.6% is higher, thus better.

CAGR:

'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.'

Using this definition on our asset we see for example:
  • The annual performance (CAGR) over 5 years of Hedge Strategy 2x Leverage is 3%, which is larger, thus better compared to the benchmark AGG (0.6%) in the same period.
  • Compared with AGG (-1.3%) in the period of the last 3 years, the annual return (CAGR) of 0.5% is larger, thus better.

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:
  • Looking at the historical 30 days volatility of 23.5% in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively greater, thus worse in comparison to the benchmark AGG (5.1%)
  • During the last 3 years, the 30 days standard deviation is 27.4%, which is greater, thus worse than the value of 6.3% 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.'

Using this definition on our asset we see for example:
  • Looking at the downside deviation of 16.9% in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively greater, thus worse in comparison to the benchmark AGG (4%)
  • During the last 3 years, the downside volatility is 19.8%, which is greater, thus worse than the value of 4.9% from the benchmark.

Sharpe:

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Using this definition on our asset we see for example:
  • Looking at the risk / return profile (Sharpe) of 0.02 in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively greater, thus better in comparison to the benchmark AGG (-0.37)
  • Compared with AGG (-0.61) in the period of the last 3 years, the Sharpe Ratio of -0.07 is greater, thus better.

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.'

Using this definition on our asset we see for example:
  • The excess return divided by the downside deviation over 5 years of Hedge Strategy 2x Leverage is 0.03, which is higher, thus better compared to the benchmark AGG (-0.48) in the same period.
  • Compared with AGG (-0.77) in the period of the last 3 years, the ratio of annual return and downside deviation of -0.1 is higher, thus better.

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.'

Applying this definition to our asset in some examples:
  • The Downside risk index over 5 years of Hedge Strategy 2x Leverage is 18 , which is higher, thus worse compared to the benchmark AGG (3.21 ) in the same period.
  • Looking at Downside risk index in of 22 in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to AGG (3.92 ).

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:
  • Compared with the benchmark AGG (-14.4 days) in the period of the last 5 years, the maximum DrawDown of -45.4 days of Hedge Strategy 2x Leverage is smaller, thus worse.
  • Looking at maximum drop from peak to valley in of -45.4 days in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to AGG (-14.4 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). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Which means for our asset as example:
  • Looking at the maximum days under water of 475 days in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively smaller, thus better in comparison to the benchmark AGG (477 days)
  • Compared with AGG (477 days) in the period of the last 3 years, the maximum days under water of 475 days is lower, thus better.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark AGG (152 days) in the period of the last 5 years, the average days below previous high of 185 days of Hedge Strategy 2x Leverage is greater, thus worse.
  • Compared with AGG (171 days) in the period of the last 3 years, the average days under water of 171 days is greater, thus worse.

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.