Description of Treasury Hedge

Statistics of Treasury Hedge (YTD)

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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.'

Applying this definition to our asset in some examples:
  • Looking at the total return, or increase in value of 62% in the last 5 years of Treasury Hedge, we see it is relatively higher, thus better in comparison to the benchmark AGG (13.8%)
  • During the last 3 years, the total return, or increase in value is 32.1%, which is higher, thus better than the value of 5.7% 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.'

Which means for our asset as example:
  • Compared with the benchmark AGG (2.6%) in the period of the last 5 years, the annual performance (CAGR) of 10.1% of Treasury Hedge is higher, thus better.
  • Looking at compounded annual growth rate (CAGR) in of 9.7% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to AGG (1.9%).

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:
  • Compared with the benchmark AGG (3%) in the period of the last 5 years, the historical 30 days volatility of 8.2% of Treasury Hedge is greater, thus worse.
  • During the last 3 years, the 30 days standard deviation is 6.2%, which is larger, thus worse than the value of 2.8% 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:
  • Compared with the benchmark AGG (3.2%) in the period of the last 5 years, the downside volatility of 9.4% of Treasury Hedge is larger, thus worse.
  • Looking at downside risk in of 7.3% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to AGG (3%).

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:
  • Compared with the benchmark AGG (0.04) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.94 of Treasury Hedge is higher, thus better.
  • During the last 3 years, the risk / return profile (Sharpe) is 1.16, which is greater, thus better than the value of -0.22 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:
  • Compared with the benchmark AGG (0.04) in the period of the last 5 years, the ratio of annual return and downside deviation of 0.81 of Treasury Hedge is higher, thus better.
  • Looking at excess return divided by the downside deviation in of 0.99 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (-0.21).

Ulcer:

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Which means for our asset as example:
  • Compared with the benchmark AGG (1.63 ) in the period of the last 5 years, the Ulcer Index of 3.86 of Treasury Hedge is higher, thus better.
  • Looking at Ulcer Index in of 1.56 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to AGG (1.9 ).

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.'

Using this definition on our asset we see for example:
  • The maximum DrawDown over 5 years of Treasury Hedge is -14.4 days, which is lower, thus worse compared to the benchmark AGG (-4.5 days) in the same period.
  • Compared with AGG (-4.5 days) in the period of the last 3 years, the maximum DrawDown of -4.4 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'

Using this definition on our asset we see for example:
  • The maximum days below previous high over 5 years of Treasury Hedge is 256 days, which is smaller, thus better compared to the benchmark AGG (331 days) in the same period.
  • During the last 3 years, the maximum time in days below previous high water mark is 110 days, which is lower, thus better than the value of 331 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 AGG (113 days) in the period of the last 5 years, the average time in days below previous high water mark of 53 days of Treasury Hedge is lower, thus better.
  • During the last 3 years, the average time in days below previous high water mark is 31 days, which is lower, thus better than the value of 136 days from the benchmark.

Performance of Treasury Hedge (YTD)

Historical returns have been extended using synthetic data.

Allocations of Treasury Hedge
()

Allocations

Returns of Treasury Hedge (%)

  • "Year" returns in the table above are not equal to the sum of monthly returns due to compounding.
  • Performance results of Treasury Hedge 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.