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.'

Applying this definition to our asset in some examples:- Looking at the total return of 51.8% in the last 5 years of US sectors low volatility, we see it is relatively lower, thus worse in comparison to the benchmark SPY (60.6%)
- Compared with SPY (38%) in the period of the last 3 years, the total return, or increase in value of 17.6% is lower, thus worse.

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Applying this definition to our asset in some examples:- The annual performance (CAGR) over 5 years of US sectors low volatility is 8.7%, which is smaller, thus worse compared to the benchmark SPY (10%) in the same period.
- Looking at annual performance (CAGR) in of 5.6% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (11.3%).

'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 (21.5%) in the period of the last 5 years, the historical 30 days volatility of 18.1% of US sectors low volatility is lower, thus better.
- Compared with SPY (17.9%) in the period of the last 3 years, the historical 30 days volatility of 14.8% is smaller, thus better.

'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:- The downside deviation over 5 years of US sectors low volatility is 13%, which is lower, thus better compared to the benchmark SPY (15.5%) in the same period.
- Looking at downside risk in of 10.9% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (12.5%).

'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.'

Applying this definition to our asset in some examples:- Looking at the ratio of return and volatility (Sharpe) of 0.34 in the last 5 years of US sectors low volatility, we see it is relatively lower, thus worse in comparison to the benchmark SPY (0.35)
- During the last 3 years, the ratio of return and volatility (Sharpe) is 0.21, which is lower, thus worse than the value of 0.49 from the benchmark.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (0.48) in the period of the last 5 years, the downside risk / excess return profile of 0.48 of US sectors low volatility is greater, thus better.
- During the last 3 years, the excess return divided by the downside deviation is 0.28, which is lower, thus worse than the value of 0.71 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.'

Which means for our asset as example:- Looking at the Ulcer Ratio of 6.69 in the last 5 years of US sectors low volatility, we see it is relatively lower, thus better in comparison to the benchmark SPY (9.55 )
- Compared with SPY (10 ) in the period of the last 3 years, the Ulcer Ratio of 6.99 is smaller, thus better.

'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:- 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.
- Looking at maximum drop from peak to valley in of -19.6 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (-24.5 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.'

Applying this definition to our asset in some examples:- Looking at the maximum days under water of 357 days in the last 5 years of US sectors low volatility, we see it is relatively lower, thus better in comparison to the benchmark SPY (431 days)
- During the last 3 years, the maximum days below previous high is 357 days, which is lower, thus better than the value of 431 days from the benchmark.

'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.'

Applying this definition to our asset in some examples:- The average days below previous high over 5 years of US sectors low volatility is 76 days, which is smaller, thus better compared to the benchmark SPY (105 days) in the same period.
- Looking at average days under water in of 103 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (144 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 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.