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, 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:- Looking at the total return, or increase in value of 183.9% in the last 5 years of US sectors mean reversion, we see it is relatively greater, thus better in comparison to the benchmark SPY (98.3%)
- During the last 3 years, the total return, or performance is 55.2%, which is greater, thus better than the value of 27.2% from the benchmark.

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (14.7%) in the period of the last 5 years, the annual return (CAGR) of 23.3% of US sectors mean reversion is larger, thus better.
- Compared with SPY (8.4%) in the period of the last 3 years, the annual performance (CAGR) of 15.8% is higher, thus better.

'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:- Compared with the benchmark SPY (20.9%) in the period of the last 5 years, the 30 days standard deviation of 27.5% of US sectors mean reversion is greater, thus worse.
- Compared with SPY (17.7%) in the period of the last 3 years, the volatility of 23.9% is larger, thus worse.

'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.'

Using this definition on our asset we see for example:- Looking at the downside volatility of 18.6% in the last 5 years of US sectors mean reversion, we see it is relatively larger, thus worse in comparison to the benchmark SPY (14.9%)
- During the last 3 years, the downside deviation is 16.9%, which is higher, thus worse than the value of 12.4% from the benchmark.

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Using this definition on our asset we see for example:- The Sharpe Ratio over 5 years of US sectors mean reversion is 0.75, which is higher, thus better compared to the benchmark SPY (0.58) in the same period.
- During the last 3 years, the Sharpe Ratio is 0.56, which is higher, thus better than the value of 0.33 from the benchmark.

'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:- Compared with the benchmark SPY (0.82) in the period of the last 5 years, the ratio of annual return and downside deviation of 1.11 of US sectors mean reversion is higher, thus better.
- During the last 3 years, the downside risk / excess return profile is 0.79, which is greater, thus better than the value of 0.47 from the benchmark.

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Applying this definition to our asset in some examples:- Looking at the Downside risk index of 8.44 in the last 5 years of US sectors mean reversion, we see it is relatively lower, thus better in comparison to the benchmark SPY (9.32 )
- Compared with SPY (10 ) in the period of the last 3 years, the Ulcer Index of 9.87 is smaller, thus better.

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Which means for our asset as example:- Looking at the maximum drop from peak to valley of -28.9 days in the last 5 years of US sectors mean reversion, we see it is relatively higher, thus better in comparison to the benchmark SPY (-33.7 days)
- During the last 3 years, the maximum reduction from previous high is -26.1 days, which is lower, thus worse than the value of -24.5 days from the benchmark.

'The Maximum 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. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Using this definition on our asset we see for example:- Looking at the maximum days under water of 266 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 (488 days)
- Compared with SPY (488 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 266 days is smaller, 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:- The average days below previous high over 5 years of US sectors mean reversion is 70 days, which is lower, thus better compared to the benchmark SPY (123 days) in the same period.
- During the last 3 years, the average days below previous high is 103 days, which is lower, thus better than the value of 177 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 mean reversion are hypothetical and do not account for slippage, fees or taxes.
- Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.