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

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

'Total return is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Using this definition on our asset we see for example:- The total return over 5 years of US sectors low volatility is 71.3%, which is lower, thus worse compared to the benchmark SPY (106.8%) in the same period.
- Compared with SPY (71.9%) in the period of the last 3 years, the total return, or performance of 44.3% is lower, thus worse.

'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 (15.7%) in the period of the last 5 years, the annual return (CAGR) of 11.4% of US sectors low volatility is lower, thus worse.
- Compared with SPY (19.8%) in the period of the last 3 years, the annual return (CAGR) of 13% is lower, thus worse.

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (18.9%) in the period of the last 5 years, the historical 30 days volatility of 16.4% of US sectors low volatility is lower, thus better.
- During the last 3 years, the 30 days standard deviation is 18.6%, which is lower, thus better than the value of 21.9% from the benchmark.

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. 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:- Compared with the benchmark SPY (13.8%) in the period of the last 5 years, the downside volatility of 11.6% of US sectors low volatility is smaller, thus better.
- Looking at downside deviation in of 13% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (15.9%).

'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.'

Using this definition on our asset we see for example:- Looking at the ratio of return and volatility (Sharpe) of 0.54 in the last 5 years of US sectors low volatility, we see it is relatively lower, thus worse in comparison to the benchmark SPY (0.69)
- During the last 3 years, the Sharpe Ratio is 0.56, which is lower, thus worse than the value of 0.79 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.'

Applying this definition to our asset in some examples:- Looking at the excess return divided by the downside deviation of 0.77 in the last 5 years of US sectors low volatility, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (0.95)
- Compared with SPY (1.09) in the period of the last 3 years, the excess return divided by the downside deviation of 0.81 is lower, thus worse.

'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:- Looking at the Ulcer Index of 4.75 in the last 5 years of US sectors low volatility, we see it is relatively lower, thus better in comparison to the benchmark SPY (5.61 )
- Looking at Ulcer Index in of 4.39 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (6.08 ).

'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.'

Which means for our asset as example:- Looking at the maximum reduction from previous high 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)
- Looking at maximum drop from peak to valley in of -24.5 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (-33.7 days).

'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.'

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 196 days, which is greater, thus worse compared to the benchmark SPY (139 days) in the same period.
- Compared with SPY (119 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 123 days is larger, 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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (32 days) in the period of the last 5 years, the average days under water of 46 days of US sectors low volatility is higher, thus worse.
- During the last 3 years, the average time in days below previous high water mark is 29 days, which is higher, thus worse than the value of 22 days from the benchmark.

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.