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 low volatility is 65.4%, which is lower, thus worse compared to the benchmark SPY (67.8%) in the same period.
- Compared with SPY (44.5%) in the period of the last 3 years, the total return of 28.4% 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:- Compared with the benchmark SPY (10.9%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 10.6% of US sectors low volatility is lower, thus worse.
- Compared with SPY (13.1%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 8.7% is smaller, thus worse.

'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 (21.4%) in the period of the last 5 years, the historical 30 days volatility of 18.2% of US sectors low volatility is smaller, thus better.
- Compared with SPY (18.8%) in the period of the last 3 years, the volatility of 15.3% is lower, thus better.

'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.'

Which means for our asset as example:- The downside volatility over 5 years of US sectors low volatility is 13%, which is lower, thus better compared to the benchmark SPY (15.4%) in the same period.
- Looking at downside deviation in of 11.3% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (13.3%).

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Applying this definition to our asset in some examples:- Looking at the risk / return profile (Sharpe) of 0.45 in the last 5 years of US sectors low volatility, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.39)
- During the last 3 years, the risk / return profile (Sharpe) is 0.41, which is smaller, thus worse than the value of 0.56 from the benchmark.

'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:- Compared with the benchmark SPY (0.55) in the period of the last 5 years, the downside risk / excess return profile of 0.62 of US sectors low volatility is greater, thus better.
- Compared with SPY (0.79) in the period of the last 3 years, the downside risk / excess return profile of 0.55 is smaller, thus worse.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (9.46 ) in the period of the last 5 years, the Downside risk index of 6.4 of US sectors low volatility is lower, thus better.
- During the last 3 years, the Ulcer Index is 6.46 , which is smaller, thus better than the value of 10 from the benchmark.

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

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 DrawDown of -26.1 days of US sectors low volatility is higher, thus better.
- Compared with SPY (-24.5 days) in the period of the last 3 years, the maximum reduction from previous high of -19.6 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). 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'

Using this definition on our asset we see for example:- The maximum time in days below previous high water mark over 5 years of US sectors low volatility is 278 days, which is smaller, thus better compared to the benchmark SPY (352 days) in the same period.
- Compared with SPY (352 days) in the period of the last 3 years, the maximum days under water of 278 days is lower, thus better.

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (78 days) in the period of the last 5 years, the average days below previous high of 57 days of US sectors low volatility is smaller, thus better.
- Compared with SPY (102 days) in the period of the last 3 years, the average time in days below previous high water mark of 70 days is lower, thus better.

Historical returns have been extended using synthetic data.
[Show Details]

Allocations and holdings shown below are delayed by one month.

Register now to get the current trading allocations.

- 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.