Description

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 (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.'

Using this definition on our asset we see for example:
  • The total return, or performance over 5 years of US sectors short lookback is 70.6%, which is smaller, thus worse compared to the benchmark SPY (122.1%) in the same period.
  • Looking at total return in of 30.2% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (64.6%).

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.'

Which means for our asset as example:
  • Looking at the annual performance (CAGR) of 11.3% in the last 5 years of US sectors short lookback, we see it is relatively lower, thus worse in comparison to the benchmark SPY (17.3%)
  • Looking at compounded annual growth rate (CAGR) in of 9.2% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (18.1%).

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:
  • Compared with the benchmark SPY (18.7%) in the period of the last 5 years, the 30 days standard deviation of 16.9% of US sectors short lookback is lower, thus better.
  • Looking at 30 days standard deviation in of 19.4% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (22.5%).

DownVol:

'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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (13.6%) in the period of the last 5 years, the downside volatility of 11.9% of US sectors short lookback is smaller, thus better.
  • Compared with SPY (16.4%) in the period of the last 3 years, the downside deviation of 13.7% is lower, thus better.

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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (0.79) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.52 of US sectors short lookback is smaller, thus worse.
  • During the last 3 years, the Sharpe Ratio is 0.35, which is smaller, thus worse than the value of 0.69 from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • The downside risk / excess return profile over 5 years of US sectors short lookback is 0.74, which is smaller, thus worse compared to the benchmark SPY (1.09) in the same period.
  • Compared with SPY (0.95) in the period of the last 3 years, the excess return divided by the downside deviation of 0.49 is lower, thus worse.

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 Downside risk index over 5 years of US sectors short lookback is 5.48 , which is smaller, thus better compared to the benchmark SPY (5.58 ) in the same period.
  • During the last 3 years, the Downside risk index is 6.42 , which is lower, thus better than the value of 6.83 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.'

Applying this definition to our asset in some examples:
  • The maximum DrawDown over 5 years of US sectors short lookback is -26.1 days, which is greater, thus better compared to the benchmark SPY (-33.7 days) in the same period.
  • Compared with SPY (-33.7 days) in the period of the last 3 years, the maximum DrawDown of -26.1 days is larger, thus better.

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:
  • The maximum time in days below previous high water mark over 5 years of US sectors short lookback is 143 days, which is larger, thus worse compared to the benchmark SPY (139 days) in the same period.
  • During the last 3 years, the maximum time in days below previous high water mark is 143 days, which is greater, thus worse than the value of 139 days from the benchmark.

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 short lookback is 48 days, which is greater, thus worse compared to the benchmark SPY (33 days) in the same period.
  • Looking at average days under water in of 49 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (35 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 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.