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:

'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.'

Which means for our asset as example:
  • Looking at the total return of 157.4% in the last 5 years of Top 3 Strategies, we see it is relatively greater, thus better in comparison to the benchmark SPY (98.3%)
  • Looking at total return in of 35% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (45.5%).

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:
  • Looking at the compounded annual growth rate (CAGR) of 20.9% in the last 5 years of Top 3 Strategies, we see it is relatively higher, thus better in comparison to the benchmark SPY (14.7%)
  • Looking at annual performance (CAGR) in of 10.6% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (13.4%).

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 30 days standard deviation over 5 years of Top 3 Strategies is 10.8%, which is lower, thus better compared to the benchmark SPY (21%) in the same period.
  • Looking at volatility in of 8.5% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (17.4%).

DownVol:

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

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (15%) in the period of the last 5 years, the downside deviation of 7.4% of Top 3 Strategies is smaller, thus better.
  • During the last 3 years, the downside deviation is 5.8%, which is smaller, thus better than the value of 12.1% 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.'

Using this definition on our asset we see for example:
  • Looking at the ratio of return and volatility (Sharpe) of 1.7 in the last 5 years of Top 3 Strategies, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.58)
  • Looking at Sharpe Ratio in of 0.95 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (0.62).

Sortino:

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Applying this definition to our asset in some examples:
  • The ratio of annual return and downside deviation over 5 years of Top 3 Strategies is 2.5, which is larger, thus better compared to the benchmark SPY (0.81) in the same period.
  • Compared with SPY (0.89) in the period of the last 3 years, the downside risk / excess return profile of 1.38 is larger, 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:
  • Looking at the Ulcer Index of 4.14 in the last 5 years of Top 3 Strategies, we see it is relatively smaller, thus better in comparison to the benchmark SPY (9.33 )
  • Compared with SPY (8.63 ) in the period of the last 3 years, the Downside risk index of 4.76 is lower, thus better.

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.'

Using this definition on our asset we see for example:
  • Looking at the maximum DrawDown of -14.3 days in the last 5 years of Top 3 Strategies, we see it is relatively higher, thus better in comparison to the benchmark SPY (-33.7 days)
  • Looking at maximum DrawDown in of -11 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (-22.1 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.'

Using this definition on our asset we see for example:
  • Looking at the maximum time in days below previous high water mark of 370 days in the last 5 years of Top 3 Strategies, we see it is relatively lower, thus better in comparison to the benchmark SPY (488 days)
  • Looking at maximum days below previous high in of 370 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (325 days).

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 below previous high of 78 days in the last 5 years of Top 3 Strategies, we see it is relatively smaller, thus better in comparison to the benchmark SPY (122 days)
  • During the last 3 years, the average days under water is 108 days, which is greater, thus worse than the value of 89 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 Top 3 Strategies 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.