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:
  • Looking at the total return, or increase in value of 67.2% in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively larger, thus better in comparison to the benchmark AGG (2.6%)
  • Compared with AGG (-5.9%) in the period of the last 3 years, the total return, or performance of 27.7% is greater, thus better.

CAGR:

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Using this definition on our asset we see for example:
  • Looking at the compounded annual growth rate (CAGR) of 10.8% in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively larger, thus better in comparison to the benchmark AGG (0.5%)
  • During the last 3 years, the compounded annual growth rate (CAGR) is 8.5%, which is larger, thus better than the value of -2% from the benchmark.

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.'

Which means for our asset as example:
  • The volatility over 5 years of Hedge Strategy 2x Leverage is 15.2%, which is higher, thus worse compared to the benchmark AGG (5.7%) in the same period.
  • During the last 3 years, the volatility is 17.5%, which is larger, thus worse than the value of 7% from the benchmark.

DownVol:

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

Applying this definition to our asset in some examples:
  • Looking at the downside deviation of 10.4% in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively higher, thus worse in comparison to the benchmark AGG (4.3%)
  • During the last 3 years, the downside deviation is 12%, which is greater, thus worse than the value of 5.3% 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:
  • Looking at the ratio of return and volatility (Sharpe) of 0.55 in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively larger, thus better in comparison to the benchmark AGG (-0.35)
  • During the last 3 years, the ratio of return and volatility (Sharpe) is 0.34, which is larger, thus better than the value of -0.65 from the benchmark.

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:
  • Compared with the benchmark AGG (-0.46) in the period of the last 5 years, the downside risk / excess return profile of 0.8 of Hedge Strategy 2x Leverage is greater, thus better.
  • Looking at excess return divided by the downside deviation in of 0.5 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to AGG (-0.85).

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark AGG (5.3 ) in the period of the last 5 years, the Ulcer Index of 8.54 of Hedge Strategy 2x Leverage is greater, thus worse.
  • During the last 3 years, the Ulcer Index is 10 , which is higher, thus worse than the value of 6.73 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.'

Applying this definition to our asset in some examples:
  • Looking at the maximum DrawDown of -22.9 days in the last 5 years of Hedge Strategy 2x Leverage, we see it is relatively lower, 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 (-18.4 days).

MaxDuration:

'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:
  • Compared with the benchmark AGG (592 days) in the period of the last 5 years, the maximum days below previous high of 320 days of Hedge Strategy 2x Leverage is lower, thus better.
  • Compared with AGG (592 days) in the period of the last 3 years, the maximum days below previous high of 320 days is smaller, 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.'

Using this definition on our asset we see for example:
  • Looking at the average days under water of 103 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 (186 days)
  • Looking at average days under water in of 105 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to AGG (251 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.