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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (67.6%) in the period of the last 5 years, the total return of 67.6% of US Sectors Balanced Sub-strategy is larger, thus better.
- During the last 3 years, the total return is 29%, which is lower, thus worse than the value of 36.7% from the benchmark.

'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.'

Which means for our asset as example:- Looking at the compounded annual growth rate (CAGR) of 10.9% in the last 5 years of US Sectors Balanced Sub-strategy, we see it is relatively greater, thus better in comparison to the benchmark SPY (10.9%)
- Looking at annual performance (CAGR) in of 8.9% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (11%).

'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 volatility over 5 years of US Sectors Balanced Sub-strategy is 16.6%, which is lower, thus better compared to the benchmark SPY (19%) in the same period.
- During the last 3 years, the volatility is 19%, which is lower, thus better than the value of 22% 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:- Compared with the benchmark SPY (13.9%) in the period of the last 5 years, the downside deviation of 11.6% of US Sectors Balanced Sub-strategy is lower, thus better.
- Compared with SPY (16.2%) in the period of the last 3 years, the downside risk of 13.4% 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:- The ratio of return and volatility (Sharpe) over 5 years of US Sectors Balanced Sub-strategy is 0.51, which is greater, thus better compared to the benchmark SPY (0.44) in the same period.
- Looking at ratio of return and volatility (Sharpe) in of 0.33 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.39).

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (0.6) in the period of the last 5 years, the ratio of annual return and downside deviation of 0.72 of US Sectors Balanced Sub-strategy is larger, thus better.
- Compared with SPY (0.53) in the period of the last 3 years, the ratio of annual return and downside deviation of 0.47 is lower, thus worse.

'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:- Looking at the Ulcer Index of 5.23 in the last 5 years of US Sectors Balanced Sub-strategy, we see it is relatively lower, thus better in comparison to the benchmark SPY (5.91 )
- During the last 3 years, the Downside risk index is 6.27 , which is smaller, thus better than the value of 7 from the benchmark.

'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:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum reduction from previous high of -29.2 days of US Sectors Balanced Sub-strategy is higher, thus better.
- Compared with SPY (-33.7 days) in the period of the last 3 years, the maximum reduction from previous high of -29.2 days is higher, 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) in days.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 142 days of US Sectors Balanced Sub-strategy is smaller, thus better.
- Compared with SPY (139 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 122 days is smaller, thus better.

'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 time in days below previous high water mark of 36 days in the last 5 years of US Sectors Balanced Sub-strategy, we see it is relatively lower, thus better in comparison to the benchmark SPY (45 days)
- Looking at average days under water in of 33 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (42 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.