Description

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.

Methodology & Assets

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

Statistics (YTD)

What do these metrics mean? [Read More] [Hide]

TotalReturn:

'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.'

Applying this definition to our asset in some examples:
  • The total return, or performance over 5 years of US sectors mean reversion is 55.1%, which is lower, thus worse compared to the benchmark SPY (57.4%) in the same period.
  • Compared with SPY (32.9%) in the period of the last 3 years, the total return, or increase in value of 19% is smaller, thus worse.

CAGR:

'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.'

Applying this definition to our asset in some examples:
  • Looking at the annual return (CAGR) of 9.2% in the last 5 years of US sectors mean reversion, we see it is relatively lower, thus worse in comparison to the benchmark SPY (9.5%)
  • Looking at annual return (CAGR) in of 6% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (10%).

Volatility:

'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 20.2% in the last 5 years of US sectors mean reversion, we see it is relatively larger, thus worse in comparison to the benchmark SPY (18.7%)
  • Looking at 30 days standard deviation in of 23.2% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (21.5%).

DownVol:

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Which means for our asset as example:
  • Compared with the benchmark SPY (13.6%) in the period of the last 5 years, the downside volatility of 14.5% of US sectors mean reversion is greater, thus worse.
  • Looking at downside volatility in of 16.8% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (15.7%).

Sharpe:

'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:
  • The ratio of return and volatility (Sharpe) over 5 years of US sectors mean reversion is 0.33, which is lower, thus worse compared to the benchmark SPY (0.37) in the same period.
  • Looking at risk / return profile (Sharpe) in of 0.15 in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (0.35).

Sortino:

'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 excess return divided by the downside deviation over 5 years of US sectors mean reversion is 0.46, which is lower, thus worse compared to the benchmark SPY (0.52) in the same period.
  • During the last 3 years, the ratio of annual return and downside deviation is 0.21, which is lower, thus worse than the value of 0.48 from the benchmark.

Ulcer:

'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:
  • The Ulcer Ratio over 5 years of US sectors mean reversion is 5.74 , which is smaller, thus better compared to the benchmark SPY (5.8 ) in the same period.
  • During the last 3 years, the Ulcer Index is 6.1 , which is lower, thus better than the value of 6.84 from the benchmark.

MaxDD:

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Which means for our asset as example:
  • Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum DrawDown of -29.2 days of US sectors mean reversion is greater, thus better.
  • During the last 3 years, the maximum DrawDown is -29.2 days, which is greater, thus better than the value of -33.7 days from the benchmark.

MaxDuration:

'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:
  • Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum days below previous high of 175 days of US sectors mean reversion is lower, thus better.
  • Looking at maximum time in days below previous high water mark in of 175 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (139 days).

AveDuration:

'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:
  • Looking at the average days below previous high of 41 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 (43 days)
  • Looking at average days under water in of 45 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (38 days).

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations
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Allocations

Returns (%)

  • 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.