Description

IMPORTANT: This strategy may use a leveraged GLD position which may cause the total allocation of the strategy to exceed 100%. See more information in this article.

The 3X Universal Investment Strategy (UISx3) is a leveraged version of our core Universal Investment Strategy (UIS), an evolved, intelligent version of the classic 60/40 equity/bond portfolio that can adapt to current conditions, shifting portfolio weight away from stocks in difficult markets and adding weight to equity in bull runs.

The 3x leveraged version of the strategy employs SPXL and TMF, which are the leveraged versions of the S&P 500 ETF, the Treasury 20+ year ETF. Since there is currently no leveraged gold ETF the strategy uses a triple position in GLD. Unlike the base UIS, the leveraged version only uses TMF and GLD to hedge SPXL exposure.

The UISx3 is appropriate for investors who are comfortable taking on higher risks in exchange for the potential for of higher returns. Because leveraged ETFs are used, we recommend allocating no more than 15% of your total portfolio to this strategy.

Methodology & Assets
  • SPXL - Direxion Daily S&P 500 Bull 3X Shares ETF
  • TMF - Direxion Daily 30-Year Treasury Bull 3x Shares ETF
  • GLD - SPDR Gold Trust

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:
  • The total return over 5 years of Universal Investment Strategy 3x Leverage is 154.7%, which is greater, thus better compared to the benchmark SPY (100.7%) in the same period.
  • Compared with SPY (38%) in the period of the last 3 years, the total return of 24.1% is lower, thus worse.

CAGR:

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Applying this definition to our asset in some examples:
  • Looking at the compounded annual growth rate (CAGR) of 20.6% in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively greater, thus better in comparison to the benchmark SPY (15%)
  • Compared with SPY (11.4%) in the period of the last 3 years, the annual performance (CAGR) of 7.5% 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.'

Which means for our asset as example:
  • The 30 days standard deviation over 5 years of Universal Investment Strategy 3x Leverage is 26.9%, which is higher, thus worse compared to the benchmark SPY (20.9%) in the same period.
  • During the last 3 years, the volatility is 24%, which is greater, thus worse than the value of 17.3% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • The downside volatility over 5 years of Universal Investment Strategy 3x Leverage is 18.9%, which is greater, thus worse compared to the benchmark SPY (15%) in the same period.
  • During the last 3 years, the downside deviation is 16.6%, which is greater, thus worse than the value of 12% 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 (0.6) in the period of the last 5 years, the Sharpe Ratio of 0.67 of Universal Investment Strategy 3x Leverage is larger, thus better.
  • Looking at Sharpe Ratio in of 0.21 in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (0.51).

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:
  • The excess return divided by the downside deviation over 5 years of Universal Investment Strategy 3x Leverage is 0.96, which is larger, thus better compared to the benchmark SPY (0.83) in the same period.
  • Compared with SPY (0.74) in the period of the last 3 years, the ratio of annual return and downside deviation of 0.3 is smaller, thus worse.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (9.33 ) in the period of the last 5 years, the Downside risk index of 16 of Universal Investment Strategy 3x Leverage is larger, thus worse.
  • During the last 3 years, the Ulcer Index is 20 , which is larger, thus worse than the value of 10 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.'

Applying this definition to our asset in some examples:
  • Looking at the maximum DrawDown of -38.4 days in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively lower, thus worse in comparison to the benchmark SPY (-33.7 days)
  • Compared with SPY (-24.5 days) in the period of the last 3 years, the maximum drop from peak to valley of -38.4 days is lower, 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) in days.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (488 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 517 days of Universal Investment Strategy 3x Leverage is greater, thus worse.
  • Compared with SPY (488 days) in the period of the last 3 years, the maximum days below previous high of 517 days is larger, thus worse.

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.'

Applying this definition to our asset in some examples:
  • Looking at the average days under water of 137 days in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively larger, thus worse in comparison to the benchmark SPY (124 days)
  • Looking at average days below previous high in of 193 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (181 days).

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 Universal Investment Strategy 3x Leverage 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.