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, or increase in value of 113.2% in the last 5 years of Top 3 Strategies, we see it is relatively greater, thus better in comparison to the benchmark SPY (66.6%)
  • During the last 3 years, the total return, or performance is 57.7%, which is greater, thus better than the value of 36.1% from the benchmark.

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 Top 3 Strategies is 16.3%, which is larger, thus better compared to the benchmark SPY (10.8%) in the same period.
  • Compared with SPY (10.8%) in the period of the last 3 years, the annual performance (CAGR) of 16.4% is higher, thus better.

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:
  • Looking at the historical 30 days volatility of 8.2% in the last 5 years of Top 3 Strategies, we see it is relatively smaller, thus better in comparison to the benchmark SPY (19%)
  • Compared with SPY (22%) in the period of the last 3 years, the historical 30 days volatility of 9.4% is lower, thus better.

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.'

Using this definition on our asset we see for example:
  • Looking at the downside risk of 5.6% in the last 5 years of Top 3 Strategies, we see it is relatively smaller, thus better in comparison to the benchmark SPY (13.9%)
  • During the last 3 years, the downside deviation is 6.6%, which is lower, thus better than the value of 16.2% 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:
  • Compared with the benchmark SPY (0.43) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.7 of Top 3 Strategies is larger, thus better.
  • During the last 3 years, the Sharpe Ratio is 1.49, which is larger, thus better than the value of 0.38 from the benchmark.

Sortino:

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Using this definition on our asset we see for example:
  • Looking at the downside risk / excess return profile of 2.46 in the last 5 years of Top 3 Strategies, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.59)
  • Compared with SPY (0.52) in the period of the last 3 years, the ratio of annual return and downside deviation of 2.12 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:
  • The Ulcer Ratio over 5 years of Top 3 Strategies is 1.6 , which is smaller, thus better compared to the benchmark SPY (5.9 ) in the same period.
  • During the last 3 years, the Downside risk index is 1.82 , which is lower, thus better than the value of 6.98 from the benchmark.

MaxDD:

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Which means for our asset as example:
  • The maximum reduction from previous high over 5 years of Top 3 Strategies is -14 days, which is higher, thus better compared to the benchmark SPY (-33.7 days) in the same period.
  • During the last 3 years, the maximum DrawDown is -14 days, which is higher, 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) in days.'

Which means for our asset as example:
  • The maximum days below previous high over 5 years of Top 3 Strategies is 92 days, which is lower, thus better compared to the benchmark SPY (187 days) in the same period.
  • 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 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:
  • Compared with the benchmark SPY (44 days) in the period of the last 5 years, the average days below previous high of 18 days of Top 3 Strategies is smaller, thus better.
  • During the last 3 years, the average days below previous high is 18 days, which is smaller, thus better than the value of 41 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.