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.'

Using this definition on our asset we see for example:
  • The total return, or increase in value over 5 years of Treasury Hedge is 51.3%, which is larger, thus better compared to the benchmark AGG (17.4%) in the same period.
  • Compared with AGG (8.8%) in the period of the last 3 years, the total return, or performance of 26.8% is greater, thus better.

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:
  • Compared with the benchmark AGG (3.3%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 8.6% of Treasury Hedge is higher, thus better.
  • Compared with AGG (2.9%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 8.2% is larger, 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 8.3% in the last 5 years of Treasury Hedge, we see it is relatively higher, thus worse in comparison to the benchmark AGG (3.1%)
  • Looking at historical 30 days volatility in of 6.2% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to AGG (2.9%).

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:
  • The downside volatility over 5 years of Treasury Hedge is 10%, which is larger, thus worse compared to the benchmark AGG (3.4%) in the same period.
  • Compared with AGG (3.1%) in the period of the last 3 years, the downside deviation of 7.7% is larger, thus worse.

Sharpe:

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Which means for our asset as example:
  • Compared with the benchmark AGG (0.24) in the period of the last 5 years, the risk / return profile (Sharpe) of 0.74 of Treasury Hedge is higher, thus better.
  • Looking at risk / return profile (Sharpe) in of 0.93 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to AGG (0.12).

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.'

Applying this definition to our asset in some examples:
  • The downside risk / excess return profile over 5 years of Treasury Hedge is 0.61, which is greater, thus better compared to the benchmark AGG (0.22) in the same period.
  • Looking at ratio of annual return and downside deviation in of 0.74 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (0.12).

Ulcer:

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Which means for our asset as example:
  • Compared with the benchmark AGG (1.64 ) in the period of the last 5 years, the Downside risk index of 3.88 of Treasury Hedge is higher, thus worse.
  • Compared with AGG (1.83 ) in the period of the last 3 years, the Ulcer Index of 1.57 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.'

Applying this definition to our asset in some examples:
  • The maximum reduction from previous high 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 (-4.2 days) in the period of the last 3 years, the maximum DrawDown of -7.5 days is smaller, thus worse.

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 AGG (331 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 256 days of Treasury Hedge is lower, thus better.
  • During the last 3 years, the maximum days under water is 110 days, which is smaller, 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.'

Using this definition on our asset we see for example:
  • Looking at the average days under water of 53 days in the last 5 years of Treasury Hedge, we see it is relatively smaller, thus better in comparison to the benchmark AGG (115 days)
  • During the last 3 years, the average time in days below previous high water mark is 28 days, which is lower, thus better than the value of 118 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.