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.

'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:- Looking at the total return, or performance of 36.3% in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively larger, thus better in comparison to the benchmark AGG (16.6%)
- Looking at total return in of 36.4% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (15.3%).

'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 annual return (CAGR) over 5 years of Hedge Strategy 2x Leverage is 6.4%, which is higher, thus better compared to the benchmark AGG (3.1%) in the same period.
- Compared with AGG (4.9%) in the period of the last 3 years, the annual return (CAGR) of 10.9% is higher, thus better.

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Which means for our asset as example:- Compared with the benchmark AGG (4.6%) in the period of the last 5 years, the 30 days standard deviation of 22.9% of Hedge Strategy 2x Leverage is larger, thus worse.
- During the last 3 years, the volatility is 24.7%, which is larger, thus worse than the value of 5.5% from the benchmark.

'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:- Compared with the benchmark AGG (3.5%) in the period of the last 5 years, the downside deviation of 16.2% of Hedge Strategy 2x Leverage is larger, thus worse.
- During the last 3 years, the downside volatility is 17.5%, which is greater, thus worse than the value of 4.2% from the benchmark.

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark AGG (0.13) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.17 of Hedge Strategy 2x Leverage is larger, thus better.
- Looking at risk / return profile (Sharpe) in of 0.34 in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to AGG (0.43).

'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:- The downside risk / excess return profile over 5 years of Hedge Strategy 2x Leverage is 0.24, which is higher, thus better compared to the benchmark AGG (0.18) in the same period.
- Compared with AGG (0.56) in the period of the last 3 years, the excess return divided by the downside deviation of 0.48 is lower, thus worse.

'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:- Compared with the benchmark AGG (1.73 ) in the period of the last 5 years, the Downside risk index of 18 of Hedge Strategy 2x Leverage is greater, thus worse.
- Looking at Ulcer Index in of 12 in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to AGG (1.26 ).

'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.'

Using this definition on our asset we see for example:- The maximum drop from peak to valley over 5 years of Hedge Strategy 2x Leverage is -35.7 days, which is smaller, thus worse compared to the benchmark AGG (-9.6 days) in the same period.
- Looking at maximum DrawDown in of -35.7 days in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to AGG (-9.6 days).

'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 days under water of 772 days in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively higher, thus worse in comparison to the benchmark AGG (331 days)
- Looking at maximum days below previous high in of 285 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to AGG (171 days).

'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 time in days below previous high water mark of 267 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 (103 days)
- Looking at average time in days below previous high water mark in of 91 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to AGG (37 days).

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 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.