A sub-strategy for the U.S. Sector strategy.

See the main US Sector strategy for a detailed asset description.

'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.'

Which means for our asset as example:- The total return over 5 years of US Sectors Balanced Sub-strategy is 85.3%, which is smaller, thus worse compared to the benchmark SPY (91.2%) in the same period.
- Looking at total return in of 35.3% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (41.5%).

'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:- Looking at the compounded annual growth rate (CAGR) of 13.1% in the last 5 years of US Sectors Balanced Sub-strategy, we see it is relatively lower, thus worse in comparison to the benchmark SPY (13.8%)
- During the last 3 years, the annual performance (CAGR) is 10.6%, which is lower, thus worse than the value of 12.3% from the benchmark.

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

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 volatility of 16.4% of US Sectors Balanced Sub-strategy is smaller, thus better.
- During the last 3 years, the 30 days standard deviation is 19.2%, which is lower, thus better than the value of 22.4% from the benchmark.

'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 SPY (13.7%) in the period of the last 5 years, the downside volatility of 11.4% of US Sectors Balanced Sub-strategy is lower, thus better.
- Compared with SPY (16.5%) in the period of the last 3 years, the downside risk of 13.6% is smaller, thus better.

'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:- Looking at the risk / return profile (Sharpe) of 0.65 in the last 5 years of US Sectors Balanced Sub-strategy, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.6)
- Looking at risk / return profile (Sharpe) in of 0.42 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.44).

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Which means for our asset as example:- The ratio of annual return and downside deviation over 5 years of US Sectors Balanced Sub-strategy is 0.93, which is higher, thus better compared to the benchmark SPY (0.83) in the same period.
- During the last 3 years, the downside risk / excess return profile is 0.6, which is larger, thus better than the value of 0.59 from the benchmark.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (5.79 ) in the period of the last 5 years, the Ulcer Ratio of 5.31 of US Sectors Balanced Sub-strategy is lower, thus better.
- Looking at Ulcer Ratio in of 6.53 in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (7.09 ).

'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 drop from peak to valley of -29.2 days in the last 5 years of US Sectors Balanced Sub-strategy, we see it is relatively larger, thus better in comparison to the benchmark SPY (-33.7 days)
- Compared with SPY (-33.7 days) in the period of the last 3 years, the maximum drop from peak to valley of -29.2 days is greater, thus better.

'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'

Applying this definition to our asset in some examples:- The maximum days below previous high over 5 years of US Sectors Balanced Sub-strategy is 176 days, which is larger, thus worse compared to the benchmark SPY (139 days) in the same period.
- Looking at maximum days under water in of 176 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (139 days).

'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:- The average days under water over 5 years of US Sectors Balanced Sub-strategy is 43 days, which is larger, thus worse compared to the benchmark SPY (37 days) in the same period.
- Looking at average days under water in of 45 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (45 days).

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of US Sectors Balanced Sub-strategy 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.