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.'

Using this definition on our asset we see for example:- The total return over 5 years of US sectors low volatility is 67.4%, which is lower, thus worse compared to the benchmark SPY (122%) in the same period.
- Compared with SPY (61%) in the period of the last 3 years, the total return, or performance of 36.9% is lower, thus worse.

'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.'

Applying this definition to our asset in some examples:- The annual performance (CAGR) over 5 years of US sectors low volatility is 10.9%, which is lower, thus worse compared to the benchmark SPY (17.3%) in the same period.
- During the last 3 years, the compounded annual growth rate (CAGR) is 11%, which is lower, thus worse than the value of 17.2% from the benchmark.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (18.8%) in the period of the last 5 years, the historical 30 days volatility of 16.5% of US sectors low volatility is lower, thus better.
- Looking at historical 30 days volatility in of 19.1% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (22.5%).

'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 SPY (13.6%) in the period of the last 5 years, the downside risk of 11.6% of US sectors low volatility is lower, thus better.
- During the last 3 years, the downside risk is 13.4%, which is lower, thus better than the value of 16.3% from the benchmark.

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Which means for our asset as example:- Looking at the ratio of return and volatility (Sharpe) of 0.51 in the last 5 years of US sectors low volatility, we see it is relatively lower, thus worse in comparison to the benchmark SPY (0.79)
- Looking at Sharpe Ratio in of 0.45 in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (0.65).

'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.'

Applying this definition to our asset in some examples:- Looking at the excess return divided by the downside deviation of 0.72 in the last 5 years of US sectors low volatility, we see it is relatively lower, thus worse in comparison to the benchmark SPY (1.09)
- During the last 3 years, the downside risk / excess return profile is 0.64, which is lower, thus worse than the value of 0.9 from the benchmark.

'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 (5.58 ) in the period of the last 5 years, the Ulcer Index of 4.89 of US sectors low volatility is lower, thus better.
- During the last 3 years, the Ulcer Ratio is 5.6 , which is smaller, thus better than the value of 6.83 from the benchmark.

'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.'

Applying this definition to our asset in some examples:- Looking at the maximum drop from peak to valley of -24.5 days in the last 5 years of US sectors low volatility, we see it is relatively greater, 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 -24.5 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:- Looking at the maximum time in days below previous high water mark of 196 days in the last 5 years of US sectors low volatility, we see it is relatively greater, thus worse in comparison to the benchmark SPY (139 days)
- Compared with SPY (139 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 196 days is higher, thus worse.

'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 51 days in the last 5 years of US sectors low volatility, we see it is relatively greater, thus worse in comparison to the benchmark SPY (33 days)
- During the last 3 years, the average days below previous high is 52 days, which is greater, thus worse than the value of 34 days from the benchmark.

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 low volatility 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.