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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark AGG (-1.3%) in the period of the last 5 years, the total return, or increase in value of 63.9% of Hedge Strategy 2x Leverage is higher, thus better.
  • Looking at total return, or increase in value in of 22.1% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (-6.4%).

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.'

Which means for our asset as example:
  • The annual return (CAGR) over 5 years of Hedge Strategy 2x Leverage is 10.4%, which is greater, thus better compared to the benchmark AGG (-0.3%) in the same period.
  • Looking at compounded annual growth rate (CAGR) in of 6.9% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (-2.2%).

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.'

Applying this definition to our asset in some examples:
  • The volatility over 5 years of Hedge Strategy 2x Leverage is 16.1%, which is greater, thus worse compared to the benchmark AGG (6.8%) in the same period.
  • During the last 3 years, the 30 days standard deviation is 14.6%, which is higher, thus worse than the value of 7.1% from the benchmark.

DownVol:

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. 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 (5%) in the period of the last 5 years, the downside deviation of 11% of Hedge Strategy 2x Leverage is greater, thus worse.
  • During the last 3 years, the downside deviation is 10%, which is larger, thus worse than the value of 5% from the benchmark.

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:
  • The Sharpe Ratio over 5 years of Hedge Strategy 2x Leverage is 0.49, which is greater, thus better compared to the benchmark AGG (-0.4) in the same period.
  • Compared with AGG (-0.67) in the period of the last 3 years, the Sharpe Ratio of 0.3 is higher, 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.'

Which means for our asset as example:
  • Looking at the excess return divided by the downside deviation of 0.72 in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively higher, thus better in comparison to the benchmark AGG (-0.55)
  • During the last 3 years, the ratio of annual return and downside deviation is 0.44, which is larger, thus better than the value of -0.94 from the benchmark.

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 9.21 in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively greater, thus worse in comparison to the benchmark AGG (9.14 )
  • During the last 3 years, the Ulcer Index is 9.83 , which is lower, thus better than the value of 10 from the benchmark.

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:
  • The maximum reduction from previous high over 5 years of Hedge Strategy 2x Leverage is -22.9 days, which is lower, thus worse compared to the benchmark AGG (-18.4 days) in the same period.
  • Compared with AGG (-17.2 days) in the period of the last 3 years, the maximum reduction from previous high of -22.9 days is lower, thus worse.

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'

Using this definition on our asset we see for example:
  • The maximum time in days below previous high water mark over 5 years of Hedge Strategy 2x Leverage is 500 days, which is smaller, thus better compared to the benchmark AGG (1082 days) in the same period.
  • During the last 3 years, the maximum days under water is 500 days, which is lower, thus better than the value of 745 days from the benchmark.

AveDuration:

'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.'

Using this definition on our asset we see for example:
  • Looking at the average time in days below previous high water mark of 155 days in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively lower, thus better in comparison to the benchmark AGG (486 days)
  • During the last 3 years, the average time in days below previous high water mark is 180 days, which is lower, thus better than the value of 371 days from the benchmark.

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.