Description

The U.S. Market Strategy was designed as an alternative to our Universal Investment Strategy which allocates between SPY (S&P 500 ETF) and TLT (U.S. Treasuries ETF). The equity component of this new strategy switches between SPY (S&P500), QQQ (Nasdaq 100), DIA (Dow 30) and SPLV (S&P 500 low volatility) so it can take advantage of different market conditions. The addition of SPLV provides a good defensive option in times of high market volatility. 

In addition to U.S. equities, the strategy utilizes a hedge strategy that switches between TLT, TIP, UUP and GLD.

The strategy's backtests performed substantially better than a simple SPY-TLT investment. All of the component ETFs are very liquid with small spreads making them easy to trade with negligible costs. 

 

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark DIA (80.4%) in the period of the last 5 years, the total return of 79.2% of US Market Strategy is lower, thus worse.
  • Compared with DIA (47.3%) in the period of the last 3 years, the total return of 47.5% is greater, thus better.

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.'

Using this definition on our asset we see for example:
  • The compounded annual growth rate (CAGR) over 5 years of US Market Strategy is 12.4%, which is lower, thus worse compared to the benchmark DIA (12.6%) in the same period.
  • Looking at compounded annual growth rate (CAGR) in of 13.9% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to DIA (13.9%).

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.'

Which means for our asset as example:
  • The 30 days standard deviation over 5 years of US Market Strategy is 8.2%, which is lower, thus better compared to the benchmark DIA (15.1%) in the same period.
  • Compared with DIA (14.8%) in the period of the last 3 years, the volatility of 8.1% is lower, 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:
  • Compared with the benchmark DIA (10.4%) in the period of the last 5 years, the downside risk of 5.7% of US Market Strategy is smaller, thus better.
  • Compared with DIA (10%) in the period of the last 3 years, the downside volatility of 5.5% is lower, thus better.

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.'

Which means for our asset as example:
  • Looking at the Sharpe Ratio of 1.22 in the last 5 years of US Market Strategy, we see it is relatively higher, thus better in comparison to the benchmark DIA (0.67)
  • During the last 3 years, the ratio of return and volatility (Sharpe) is 1.41, which is higher, thus better than the value of 0.77 from the benchmark.

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 DIA (0.96) in the period of the last 5 years, the downside risk / excess return profile of 1.74 of US Market Strategy is greater, thus better.
  • During the last 3 years, the downside risk / excess return profile is 2.06, which is greater, thus better than the value of 1.14 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.'

Which means for our asset as example:
  • The Ulcer Index over 5 years of US Market Strategy is 2.61 , which is lower, thus better compared to the benchmark DIA (5.99 ) in the same period.
  • Looking at Downside risk index in of 2.24 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (4.37 ).

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:
  • Looking at the maximum reduction from previous high of -9.2 days in the last 5 years of US Market Strategy, we see it is relatively higher, thus better in comparison to the benchmark DIA (-20.8 days)
  • Looking at maximum drop from peak to valley in of -8.1 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to DIA (-16 days).

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.'

Using this definition on our asset we see for example:
  • The maximum time in days below previous high water mark over 5 years of US Market Strategy is 261 days, which is lower, thus better compared to the benchmark DIA (477 days) in the same period.
  • Compared with DIA (142 days) in the period of the last 3 years, the maximum days under water of 117 days is lower, thus better.

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:
  • Compared with the benchmark DIA (116 days) in the period of the last 5 years, the average time in days below previous high water mark of 48 days of US Market Strategy is smaller, thus better.
  • During the last 3 years, the average days under water is 24 days, which is lower, thus better than the value of 41 days from the benchmark.

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 US Market Strategy are hypothetical and do not account for slippage, fees or taxes.
  • Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.