Description

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

Methodology & Assets

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

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.'

Using this definition on our asset we see for example:
  • Looking at the total return, or performance of 76.9% in the last 5 years of US sectors low volatility, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (84.3%)
  • During the last 3 years, the total return, or performance is 31.3%, which is lower, thus worse than the value of 37.3% from the benchmark.

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:
  • Compared with the benchmark SPY (13%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 12.1% of US sectors low volatility is smaller, thus worse.
  • Looking at compounded annual growth rate (CAGR) in of 9.5% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (11.1%).

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.'

Using this definition on our asset we see for example:
  • The historical 30 days volatility over 5 years of US sectors low volatility is 16.6%, which is lower, thus better compared to the benchmark SPY (18.8%) in the same period.
  • Compared with SPY (22.3%) in the period of the last 3 years, the volatility of 19.3% is smaller, 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.'

Applying this definition to our asset in some examples:
  • The downside risk over 5 years of US sectors low volatility is 11.7%, which is smaller, thus better compared to the benchmark SPY (13.7%) in the same period.
  • During the last 3 years, the downside risk is 13.7%, which is lower, thus better than the value of 16.5% from the benchmark.

Sharpe:

'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.'

Using this definition on our asset we see for example:
  • The Sharpe Ratio over 5 years of US sectors low volatility is 0.58, which is greater, thus better compared to the benchmark SPY (0.56) in the same period.
  • Looking at Sharpe Ratio in of 0.36 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.39).

Sortino:

'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:
  • Compared with the benchmark SPY (0.77) in the period of the last 5 years, the excess return divided by the downside deviation of 0.82 of US sectors low volatility is higher, thus better.
  • Looking at excess return divided by the downside deviation in of 0.51 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.52).

Ulcer:

'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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (5.78 ) in the period of the last 5 years, the Downside risk index of 4.87 of US sectors low volatility is smaller, thus better.
  • Compared with SPY (7.08 ) in the period of the last 3 years, the Ulcer Ratio of 5.73 is lower, thus better.

MaxDD:

'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:
  • The maximum drop from peak to valley over 5 years of US sectors low volatility is -24.5 days, which is larger, thus better compared to the benchmark SPY (-33.7 days) in the same period.
  • During the last 3 years, the maximum reduction from previous high is -24.5 days, which is higher, thus better than the value of -33.7 days from the benchmark.

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.'

Which means for our asset as example:
  • The maximum time in days below previous high water mark over 5 years of US sectors low volatility is 195 days, which is larger, thus worse compared to the benchmark SPY (139 days) in the same period.
  • Compared with SPY (139 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 195 days is greater, thus worse.

AveDuration:

'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.'

Which means for our asset as example:
  • Looking at the average time in days below previous high water mark of 50 days in the last 5 years of US sectors low volatility, we see it is relatively larger, thus worse in comparison to the benchmark SPY (37 days)
  • Compared with SPY (45 days) in the period of the last 3 years, the average time in days below previous high water mark of 54 days is greater, thus worse.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations
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Allocations

Returns (%)

  • 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.