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:
  • Compared with the benchmark SPY (121.2%) in the period of the last 5 years, the total return, or performance of 52.4% of US sectors short lookback is lower, thus worse.
  • During the last 3 years, the total return, or increase in value is 28.4%, which is lower, thus worse than the value of 67.5% 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 return (CAGR) over 5 years of US sectors short lookback is 8.8%, which is smaller, thus worse compared to the benchmark SPY (17.2%) in the same period.
  • Compared with SPY (18.7%) in the period of the last 3 years, the annual performance (CAGR) of 8.7% is smaller, thus worse.

Volatility:

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Using this definition on our asset we see for example:
  • The volatility over 5 years of US sectors short lookback is 17.1%, which is lower, thus better compared to the benchmark SPY (18.7%) in the same period.
  • Compared with SPY (22.5%) in the period of the last 3 years, the volatility of 19.4% is lower, thus better.

DownVol:

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

Using this definition on our asset we see for example:
  • Looking at the downside deviation of 12.1% in the last 5 years of US sectors short lookback, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.6%)
  • During the last 3 years, the downside risk is 13.7%, which is lower, thus better than the value of 16.3% from the benchmark.

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:
  • Compared with the benchmark SPY (0.79) in the period of the last 5 years, the risk / return profile (Sharpe) of 0.37 of US sectors short lookback is smaller, thus worse.
  • Looking at risk / return profile (Sharpe) in of 0.32 in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (0.72).

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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (1.08) in the period of the last 5 years, the excess return divided by the downside deviation of 0.52 of US sectors short lookback is lower, thus worse.
  • During the last 3 years, the excess return divided by the downside deviation is 0.45, which is smaller, thus worse than the value of 1 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:
  • Looking at the Downside risk index of 5.59 in the last 5 years of US sectors short lookback, we see it is relatively larger, thus worse in comparison to the benchmark SPY (5.59 )
  • Compared with SPY (6.83 ) in the period of the last 3 years, the Ulcer Index of 6.43 is lower, 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.'

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 -26.1 days of US sectors short lookback is greater, thus better.
  • Looking at maximum DrawDown in of -26.1 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (-33.7 days).

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). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (139 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 157 days of US sectors short lookback is greater, thus worse.
  • During the last 3 years, the maximum days under water 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (33 days) in the period of the last 5 years, the average days below previous high of 50 days of US sectors short lookback is higher, thus worse.
  • During the last 3 years, the average time in days below previous high water mark is 43 days, which is greater, thus worse than the value of 35 days from the benchmark.

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.