Description

This strategy selects the top three performers from our core strategies, based on the most recent 6 month performance, and allocates one third to each of them.

Note that very often the strategy will invest in the more aggressive of our strategies, which might not be suitable for all investors. You can create your version of this strategy with our Portfolio Builder. Simply select the top 2, 3, or 4 strategies and assign equal weights to each or adjust your allocations for your risk level. You will need to manually review and update the top performers periodically.

Methodology & Assets

All of our current strategies are included in the algorithm.

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:
  • The total return, or increase in value over 5 years of Top 3 Strategies is 79.8%, which is higher, thus better compared to the benchmark SPY (32.9%) in the same period.
  • Looking at total return, or increase in value in of 46.1% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (11.6%).

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.'

Using this definition on our asset we see for example:
  • The compounded annual growth rate (CAGR) over 5 years of Top 3 Strategies is 12.5%, which is greater, thus better compared to the benchmark SPY (5.8%) in the same period.
  • Compared with SPY (3.7%) in the period of the last 3 years, the annual performance (CAGR) of 13.5% is greater, thus better.

Volatility:

'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.'

Applying this definition to our asset in some examples:
  • Looking at the historical 30 days volatility of 7.8% in the last 5 years of Top 3 Strategies, we see it is relatively lower, thus better in comparison to the benchmark SPY (18%)
  • During the last 3 years, the 30 days standard deviation is 8.7%, which is smaller, thus better than the value of 20.3% 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.'

Applying this definition to our asset in some examples:
  • Looking at the downside volatility of 5.5% in the last 5 years of Top 3 Strategies, we see it is relatively smaller, thus better in comparison to the benchmark SPY (13.4%)
  • Compared with SPY (15.3%) in the period of the last 3 years, the downside deviation of 6.2% is lower, thus better.

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:
  • Looking at the risk / return profile (Sharpe) of 1.28 in the last 5 years of Top 3 Strategies, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.19)
  • Looking at risk / return profile (Sharpe) in of 1.27 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.06).

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:
  • The downside risk / excess return profile over 5 years of Top 3 Strategies is 1.82, which is greater, thus better compared to the benchmark SPY (0.25) in the same period.
  • Compared with SPY (0.08) in the period of the last 3 years, the downside risk / excess return profile of 1.76 is higher, thus better.

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.'

Using this definition on our asset we see for example:
  • The Downside risk index over 5 years of Top 3 Strategies is 2 , which is smaller, thus better compared to the benchmark SPY (5.17 ) in the same period.
  • During the last 3 years, the Downside risk index is 1.88 , which is lower, thus better than the value of 5.93 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:
  • Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum DrawDown of -14.8 days of Top 3 Strategies is higher, thus better.
  • During the last 3 years, the maximum DrawDown is -14.8 days, which is greater, thus better than the value of -33.7 days from the benchmark.

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'

Which means for our asset as example:
  • Looking at the maximum time in days below previous high water mark of 206 days in the last 5 years of Top 3 Strategies, we see it is relatively larger, thus worse in comparison to the benchmark SPY (187 days)
  • During the last 3 years, the maximum days below previous high is 92 days, which is lower, thus better than the value of 139 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (42 days) in the period of the last 5 years, the average time in days below previous high water mark of 36 days of Top 3 Strategies is lower, thus better.
  • During the last 3 years, the average time in days below previous high water mark is 18 days, which is smaller, thus better than the value of 36 days from the benchmark.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations
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Allocations

Returns (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of Top 3 Strategies 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.