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.'

Which means for our asset as example:
  • Looking at the total return, or performance of 88.6% in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively higher, thus better in comparison to the benchmark AGG (1.6%)
  • Looking at total return, or performance in of 40% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (-7.2%).

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark AGG (0.3%) in the period of the last 5 years, the annual return (CAGR) of 13.5% of Hedge Strategy 2x Leverage is higher, thus better.
  • Compared with AGG (-2.5%) in the period of the last 3 years, the annual return (CAGR) of 11.9% is higher, 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:
  • The 30 days standard deviation over 5 years of Hedge Strategy 2x Leverage is 15.8%, which is higher, thus worse compared to the benchmark AGG (6.6%) in the same period.
  • Looking at volatility in of 14.1% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to AGG (6.7%).

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.'

Which means for our asset as example:
  • Compared with the benchmark AGG (4.9%) in the period of the last 5 years, the downside volatility of 10.7% of Hedge Strategy 2x Leverage is larger, thus worse.
  • During the last 3 years, the downside deviation is 9.4%, which is larger, thus worse than the value of 4.8% 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark AGG (-0.33) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.7 of Hedge Strategy 2x Leverage is greater, thus better.
  • Looking at Sharpe Ratio in of 0.67 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (-0.74).

Sortino:

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Using this definition on our asset we see for example:
  • The downside risk / excess return profile over 5 years of Hedge Strategy 2x Leverage is 1.03, which is greater, thus better compared to the benchmark AGG (-0.45) in the same period.
  • Compared with AGG (-1.04) in the period of the last 3 years, the excess return divided by the downside deviation of 1 is greater, 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.'

Applying this definition to our asset in some examples:
  • Looking at the Downside risk index of 9.1 in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively higher, thus worse in comparison to the benchmark AGG (8.48 )
  • Compared with AGG (10 ) in the period of the last 3 years, the Ulcer Ratio of 9.67 is smaller, thus better.

MaxDD:

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Which means for our asset as example:
  • Looking at the maximum reduction from previous high of -22.9 days in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively smaller, thus worse in comparison to the benchmark AGG (-18.4 days)
  • Looking at maximum DrawDown in of -22.9 days in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to AGG (-17.8 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:
  • Compared with the benchmark AGG (917 days) in the period of the last 5 years, the maximum days below previous high of 500 days of Hedge Strategy 2x Leverage is smaller, thus better.
  • During the last 3 years, the maximum days below previous high is 500 days, which is lower, thus better than the value of 666 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 time in days below previous high water mark of 157 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 (361 days)
  • Looking at average days under water in of 184 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to AGG (302 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.