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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark AGG (-4%) in the period of the last 5 years, the total return of 27.4% of Hedge Strategy 2x Leverage is higher, thus better.
  • During the last 3 years, the total return, or increase in value is 20.9%, which is larger, thus better than the value of 8.5% 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.'

Which means for our asset as example:
  • Compared with the benchmark AGG (-0.8%) in the period of the last 5 years, the annual performance (CAGR) of 5% of Hedge Strategy 2x Leverage is higher, thus better.
  • Looking at compounded annual growth rate (CAGR) in of 6.5% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to AGG (2.8%).

Volatility:

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Applying this definition to our asset in some examples:
  • The volatility over 5 years of Hedge Strategy 2x Leverage is 14.1%, which is greater, thus worse compared to the benchmark AGG (6%) in the same period.
  • Compared with AGG (6.8%) in the period of the last 3 years, the historical 30 days volatility of 14.3% is greater, thus worse.

DownVol:

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

Which means for our asset as example:
  • Looking at the downside volatility of 9.8% in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively greater, thus worse in comparison to the benchmark AGG (4.3%)
  • Compared with AGG (4.6%) in the period of the last 3 years, the downside risk of 9.9% is higher, thus worse.

Sharpe:

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Applying this definition to our asset in some examples:
  • Looking at the risk / return profile (Sharpe) of 0.18 in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively larger, thus better in comparison to the benchmark AGG (-0.55)
  • Compared with AGG (0.04) in the period of the last 3 years, the Sharpe Ratio of 0.28 is larger, thus better.

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.'

Applying this definition to our asset in some examples:
  • 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 (-0.78)
  • Looking at ratio of annual return and downside deviation in of 0.41 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (0.06).

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 (9.5 ) in the same period.
  • Compared with AGG (3.78 ) in the period of the last 3 years, the Ulcer Ratio of 8.25 is greater, 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 (-18.4 days) in the period of the last 5 years, the maximum DrawDown of -22.9 days of Hedge Strategy 2x Leverage is lower, thus worse.
  • 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 (-9.8 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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark AGG (1230 days) in the period of the last 5 years, the maximum days below previous high of 500 days of Hedge Strategy 2x Leverage is lower, thus better.
  • Compared with AGG (487 days) in the period of the last 3 years, the maximum days under water of 195 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.'

Which means for our asset as example:
  • The average days under water over 5 years of Hedge Strategy 2x Leverage is 165 days, which is lower, thus better compared to the benchmark AGG (612 days) in the same period.
  • Looking at average days below previous high in of 59 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to AGG (191 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.