Description of US sectors 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 short lookback (YTD)

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

TotalReturn:

'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.'

Applying this definition to our asset in some examples:
  • The total return over 5 years of US sectors short lookback is 87.3%, which is larger, thus better compared to the benchmark SPY (67.9%) in the same period.
  • Compared with SPY (46.6%) in the period of the last 3 years, the total return of 42.2% is lower, thus worse.

CAGR:

'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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (10.9%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 13.4% of US sectors short lookback is greater, thus better.
  • Looking at annual return (CAGR) in of 12.4% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (13.6%).

Volatility:

'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.'

Applying this definition to our asset in some examples:
  • Looking at the volatility of 14.7% in the last 5 years of US sectors short lookback, we see it is relatively higher, thus worse in comparison to the benchmark SPY (13.3%)
  • Compared with SPY (12.5%) in the period of the last 3 years, the 30 days standard deviation of 14.2% is higher, thus worse.

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:
  • Compared with the benchmark SPY (14.6%) in the period of the last 5 years, the downside risk of 16% of US sectors short lookback is larger, thus worse.
  • Looking at downside deviation in of 15.6% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (14.2%).

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.'

Using this definition on our asset we see for example:
  • The risk / return profile (Sharpe) over 5 years of US sectors short lookback is 0.74, which is greater, thus better compared to the benchmark SPY (0.64) in the same period.
  • Compared with SPY (0.89) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 0.7 is smaller, thus worse.

Sortino:

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (0.58) in the period of the last 5 years, the downside risk / excess return profile of 0.68 of US sectors short lookback is higher, thus better.
  • During the last 3 years, the excess return divided by the downside deviation is 0.64, which is lower, thus worse than the value of 0.78 from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (3.96 ) in the period of the last 5 years, the Ulcer Index of 5.56 of US sectors short lookback is larger, thus better.
  • Compared with SPY (4.01 ) in the period of the last 3 years, the Ulcer Ratio of 5.99 is greater, thus better.

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.'

Using this definition on our asset we see for example:
  • The maximum reduction from previous high over 5 years of US sectors short lookback is -20.7 days, which is lower, thus worse compared to the benchmark SPY (-19.3 days) in the same period.
  • Compared with SPY (-19.3 days) in the period of the last 3 years, the maximum reduction from previous high of -20.7 days is lower, thus worse.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum days under water of 196 days of US sectors short lookback is higher, thus worse.
  • Compared with SPY (139 days) in the period of the last 3 years, the maximum days below previous high of 155 days is higher, thus worse.

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:
  • The average time in days below previous high water mark over 5 years of US sectors short lookback is 50 days, which is larger, thus worse compared to the benchmark SPY (41 days) in the same period.
  • Looking at average days below previous high in of 48 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (36 days).

Performance of US sectors short lookback (YTD)

Historical returns have been extended using synthetic data.

Allocations of US sectors short lookback
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Allocations

Returns of US sectors 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 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.