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

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

'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:- Looking at the total return, or increase in value of 152.9% in the last 5 years of US Sectors Balanced Sub-strategy, we see it is relatively higher, thus better in comparison to the benchmark SPY (97.7%)
- During the last 3 years, the total return, or increase in value is 42.7%, which is greater, thus better than the value of 26% from the benchmark.

'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 SPY (14.6%) in the period of the last 5 years, the annual return (CAGR) of 20.4% of US Sectors Balanced Sub-strategy is larger, thus better.
- During the last 3 years, the compounded annual growth rate (CAGR) is 12.6%, which is greater, thus better than the value of 8% 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.'

Which means for our asset as example:- Compared with the benchmark SPY (20.9%) in the period of the last 5 years, the historical 30 days volatility of 23.7% of US Sectors Balanced Sub-strategy is greater, thus worse.
- During the last 3 years, the historical 30 days volatility is 21.2%, which is greater, thus worse than the value of 17.5% from the benchmark.

'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 US Sectors Balanced Sub-strategy is 16.7%, which is larger, thus worse compared to the benchmark SPY (15%) in the same period.
- Compared with SPY (12.3%) in the period of the last 3 years, the downside risk of 15.4% is greater, thus worse.

'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:- The ratio of return and volatility (Sharpe) over 5 years of US Sectors Balanced Sub-strategy is 0.75, which is greater, thus better compared to the benchmark SPY (0.58) in the same period.
- Looking at ratio of return and volatility (Sharpe) in of 0.48 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.32).

'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.'

Using this definition on our asset we see for example:- Looking at the downside risk / excess return profile of 1.07 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 (0.81)
- Looking at excess return divided by the downside deviation in of 0.66 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.45).

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (9.32 ) in the period of the last 5 years, the Ulcer Index of 11 of US Sectors Balanced Sub-strategy is greater, thus worse.
- Looking at Ulcer Index in of 13 in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (10 ).

'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:- Looking at the maximum reduction from previous high of -28.9 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)
- During the last 3 years, the maximum DrawDown is -26.5 days, which is lower, thus worse than the value of -24.5 days from the benchmark.

'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 time in days below previous high water mark over 5 years of US Sectors Balanced Sub-strategy is 545 days, which is higher, thus worse compared to the benchmark SPY (488 days) in the same period.
- Looking at maximum days below previous high in of 545 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (488 days).

'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 SPY (123 days) in the period of the last 5 years, the average days below previous high of 146 days of US Sectors Balanced Sub-strategy is larger, thus worse.
- Compared with SPY (179 days) in the period of the last 3 years, the average days under water of 217 days is larger, thus worse.

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 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.