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, or performance over 5 years of US sectors low volatility is 77.6%, which is lower, thus worse compared to the benchmark SPY (124.9%) in the same period.
- Compared with SPY (60.5%) in the period of the last 3 years, the total return of 27.4% 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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (17.6%) in the period of the last 5 years, the annual performance (CAGR) of 12.2% of US sectors low volatility is lower, thus worse.
- Looking at compounded annual growth rate (CAGR) in of 8.4% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (17.1%).

'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.'

Using this definition on our asset we see for example:- Looking at the volatility of 16.4% in the last 5 years of US sectors low volatility, we see it is relatively smaller, thus better in comparison to the benchmark SPY (18.7%)
- Compared with SPY (22.6%) in the period of the last 3 years, the volatility of 19.1% is lower, 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:- Looking at the downside volatility of 11.5% in the last 5 years of US sectors low volatility, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.5%)
- Compared with SPY (16.4%) in the period of the last 3 years, the downside volatility of 13.5% is lower, thus better.

'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:- The Sharpe Ratio over 5 years of US sectors low volatility is 0.59, which is lower, thus worse compared to the benchmark SPY (0.81) in the same period.
- Compared with SPY (0.65) in the period of the last 3 years, the Sharpe Ratio of 0.31 is smaller, thus worse.

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Using this definition on our asset we see for example:- Looking at the ratio of annual return and downside deviation of 0.84 in the last 5 years of US sectors low volatility, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (1.12)
- During the last 3 years, the excess return divided by the downside deviation is 0.44, which is lower, thus worse than the value of 0.89 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:- Compared with the benchmark SPY (5.58 ) in the period of the last 5 years, the Ulcer Ratio of 4.71 of US sectors low volatility is lower, thus better.
- During the last 3 years, the Ulcer Ratio is 5.6 , which is lower, thus better than the value of 6.82 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:- The maximum DrawDown over 5 years of US sectors low volatility is -24.5 days, which is higher, 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 larger, thus better than the value of -33.7 days from the benchmark.

'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 days under water over 5 years of US sectors low volatility is 196 days, which is larger, thus worse compared to the benchmark SPY (139 days) in the same period.
- During the last 3 years, the maximum days under water is 196 days, which is larger, thus worse than the value of 128 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.'

Using this definition on our asset we see for example:- The average days below previous high over 5 years of US sectors low volatility is 45 days, which is greater, thus worse compared to the benchmark SPY (32 days) in the same period.
- During the last 3 years, the average time in days below previous high water mark is 52 days, which is larger, thus worse than the value of 33 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.