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.'

Which means for our asset as example:
  • Looking at the total return, or performance of 84.2% in the last 5 years of Top 3 Strategies, we see it is relatively lower, thus worse in comparison to the benchmark SPY (84.3%)
  • During the last 3 years, the total return is 35.7%, which is smaller, thus worse than the value of 37.3% from the benchmark.

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:
  • Compared with the benchmark SPY (13%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 13% of Top 3 Strategies is higher, thus better.
  • Compared with SPY (11.1%) in the period of the last 3 years, the annual return (CAGR) of 10.7% is lower, thus worse.

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:
  • Compared with the benchmark SPY (18.8%) in the period of the last 5 years, the 30 days standard deviation of 7.9% of Top 3 Strategies is smaller, thus better.
  • Compared with SPY (22.3%) in the period of the last 3 years, the 30 days standard deviation of 9% is smaller, thus better.

DownVol:

'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:
  • The downside risk over 5 years of Top 3 Strategies is 5.6%, which is lower, thus better compared to the benchmark SPY (13.7%) in the same period.
  • During the last 3 years, the downside deviation is 6.6%, which is lower, thus better than the value of 16.5% 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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (0.56) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.32 of Top 3 Strategies is larger, thus better.
  • Looking at ratio of return and volatility (Sharpe) in of 0.91 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.39).

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:
  • Compared with the benchmark SPY (0.77) in the period of the last 5 years, the downside risk / excess return profile of 1.88 of Top 3 Strategies is greater, thus better.
  • During the last 3 years, the ratio of annual return and downside deviation is 1.25, which is greater, thus better than the value of 0.52 from the benchmark.

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:
  • Compared with the benchmark SPY (5.78 ) in the period of the last 5 years, the Ulcer Index of 1.65 of Top 3 Strategies is lower, thus better.
  • Looking at Downside risk index in of 1.92 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (7.08 ).

MaxDD:

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

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 reduction from previous high of -14.3 days of Top 3 Strategies is greater, thus better.
  • Compared with SPY (-33.7 days) in the period of the last 3 years, the maximum DrawDown of -14.3 days is greater, thus better.

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:
  • Compared with the benchmark SPY (139 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 93 days of Top 3 Strategies is lower, thus better.
  • During the last 3 years, the maximum time in days below previous high water mark is 93 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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (37 days) in the period of the last 5 years, the average days under water of 21 days of Top 3 Strategies is smaller, thus better.
  • Compared with SPY (45 days) in the period of the last 3 years, the average time in days below previous high water mark of 22 days is smaller, thus better.

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.