A sub-strategy for the U.S. Sector strategy. It works with short term mean reversion criteria thus penalizing recent winners and favoring sectors that have recently corrected.

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:- Compared with the benchmark SPY (80.1%) in the period of the last 5 years, the total return, or increase in value of 232.7% of US sectors mean reversion is larger, thus better.
- Compared with SPY (30.8%) in the period of the last 3 years, the total return, or increase in value of 70.8% is larger, thus better.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (12.5%) in the period of the last 5 years, the annual performance (CAGR) of 27.3% of US sectors mean reversion is higher, thus better.
- Looking at compounded annual growth rate (CAGR) in of 19.6% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (9.4%).

'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.'

Applying this definition to our asset in some examples:- Looking at the 30 days standard deviation of 27.1% in the last 5 years of US sectors mean reversion, we see it is relatively greater, thus worse in comparison to the benchmark SPY (21.3%)
- During the last 3 years, the 30 days standard deviation is 24.3%, which is larger, thus worse than the value of 17.6% from the benchmark.

'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 risk over 5 years of US sectors mean reversion is 18.3%, which is higher, thus worse compared to the benchmark SPY (15.3%) in the same period.
- Looking at downside deviation in of 16.9% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (12.3%).

'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:- Compared with the benchmark SPY (0.47) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.91 of US sectors mean reversion is larger, thus better.
- Compared with SPY (0.39) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 0.7 is greater, thus better.

'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:- The downside risk / excess return profile over 5 years of US sectors mean reversion is 1.35, which is greater, thus better compared to the benchmark SPY (0.66) in the same period.
- Compared with SPY (0.56) in the period of the last 3 years, the excess return divided by the downside deviation of 1.01 is greater, thus better.

'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.'

Using this definition on our asset we see for example:- Looking at the Ulcer Index of 8.08 in the last 5 years of US sectors mean reversion, we see it is relatively smaller, thus better in comparison to the benchmark SPY (9.43 )
- During the last 3 years, the Ulcer Ratio is 9.43 , which is lower, thus better than the value of 10 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 reduction from previous high over 5 years of US sectors mean reversion is -28.9 days, which is greater, thus better compared to the benchmark SPY (-33.7 days) in the same period.
- Looking at maximum DrawDown in of -26.1 days in the period of the last 3 years, we see it is relatively lower, thus worse 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.'

Which means for our asset as example:- Compared with the benchmark SPY (478 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 266 days of US sectors mean reversion is smaller, thus better.
- Looking at maximum time in days below previous high water mark in of 266 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (478 days).

'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 days below previous high of 47 days in the last 5 years of US sectors mean reversion, we see it is relatively lower, thus better in comparison to the benchmark SPY (118 days)
- Compared with SPY (173 days) in the period of the last 3 years, the average days under water of 65 days is smaller, thus better.

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 mean reversion 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.