Description of US sectors long short lookback

A sub-strategy for the U.S. Sector strategy. It looks at momentum using a short lookback period to respond faster to changes in the market.

Methodology & Assets

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

Statistics of US sectors long short lookback (YTD)

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

TotalReturn:

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Which means for our asset as example:
  • Compared with the benchmark SPY (68.2%) in the period of the last 5 years, the total return, or performance of 83.3% of US sectors long short lookback is larger, thus better.
  • During the last 3 years, the total return, or performance is 48.3%, which is higher, thus better than the value of 47.7% from the benchmark.

CAGR:

'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 long short lookback is 12.9%, which is greater, thus better compared to the benchmark SPY (11%) in the same period.
  • During the last 3 years, the annual return (CAGR) is 14%, which is greater, thus better than the value of 13.9% from the benchmark.

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.'

Which means for our asset as example:
  • Looking at the volatility of 14.6% in the last 5 years of US sectors long short lookback, we see it is relatively larger, thus worse in comparison to the benchmark SPY (13.2%)
  • Looking at historical 30 days volatility in of 14.2% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (12.4%).

DownVol:

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. 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.'

Which means for our asset as example:
  • Looking at the downside risk of 15.9% in the last 5 years of US sectors long short lookback, we see it is relatively larger, thus worse in comparison to the benchmark SPY (14.6%)
  • During the last 3 years, the downside risk is 15.3%, which is greater, thus worse than the value of 14% from the benchmark.

Sharpe:

'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 risk / return profile (Sharpe) of 0.71 in the last 5 years of US sectors long short lookback, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.64)
  • During the last 3 years, the risk / return profile (Sharpe) is 0.81, which is smaller, thus worse than the value of 0.92 from the benchmark.

Sortino:

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (0.58) in the period of the last 5 years, the downside risk / excess return profile of 0.65 of US sectors long short lookback is larger, thus better.
  • Looking at downside risk / excess return profile in of 0.76 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.81).

Ulcer:

'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.'

Applying this definition to our asset in some examples:
  • The Downside risk index over 5 years of US sectors long short lookback is 5.34 , which is larger, thus better compared to the benchmark SPY (3.95 ) in the same period.
  • Compared with SPY (4 ) in the period of the last 3 years, the Ulcer Ratio of 5.63 is higher, thus better.

MaxDD:

'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 (-19.3 days) in the period of the last 5 years, the maximum reduction from previous high of -20.7 days of US sectors long short lookback is smaller, thus worse.
  • During the last 3 years, the maximum reduction from previous high is -20.7 days, which is lower, thus worse than the value of -19.3 days from the benchmark.

MaxDuration:

'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.'

Applying this definition to our asset in some examples:
  • The maximum days below previous high over 5 years of US sectors long short lookback is 196 days, which is larger, thus worse compared to the benchmark SPY (187 days) in the same period.
  • Compared with SPY (131 days) in the period of the last 3 years, the maximum days below previous high of 147 days is larger, thus worse.

AveDuration:

'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 time in days below previous high water mark over 5 years of US sectors long short lookback is 47 days, which is larger, thus worse compared to the benchmark SPY (39 days) in the same period.
  • During the last 3 years, the average time in days below previous high water mark is 41 days, which is greater, thus worse than the value of 33 days from the benchmark.

Performance of US sectors long short lookback (YTD)

Historical returns have been extended using synthetic data.

Allocations of US sectors long short lookback
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Allocations

Returns of US sectors long short lookback (%)

  • "Year" returns in the table above are not equal to the sum of monthly returns due to compounding.
  • Performance results of US sectors long short lookback 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.