Description of US sectors long worst US sectors

A sub-strategy for the U.S. Sector strategy. It goes long the worst performing U.S. sectors assuming they may rebound. 

Methodology & Assets

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

Statistics of US sectors long worst US sectors (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:
  • Looking at the total return, or performance of 153.2% in the last 5 years of US sectors long worst US sectors, we see it is relatively larger, thus better in comparison to the benchmark SPY (68.2%)
  • Compared with SPY (47.7%) in the period of the last 3 years, the total return, or performance of 62.4% is higher, thus better.

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 (11%) in the period of the last 5 years, the annual return (CAGR) of 20.4% of US sectors long worst US sectors is greater, thus better.
  • Looking at compounded annual growth rate (CAGR) in of 17.5% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (13.9%).

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.'

Which means for our asset as example:
  • Looking at the volatility of 15.2% in the last 5 years of US sectors long worst US sectors, we see it is relatively greater, thus worse in comparison to the benchmark SPY (13.2%)
  • Looking at 30 days standard deviation in of 12.6% in the period of the last 3 years, we see it is relatively higher, 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 deviation of 15.8% in the last 5 years of US sectors long worst US sectors, we see it is relatively higher, thus worse in comparison to the benchmark SPY (14.6%)
  • Compared with SPY (14%) in the period of the last 3 years, the downside deviation of 13.3% is smaller, thus better.

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.'

Which means for our asset as example:
  • Looking at the risk / return profile (Sharpe) of 1.18 in the last 5 years of US sectors long worst US sectors, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.64)
  • Looking at risk / return profile (Sharpe) in of 1.19 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.92).

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.'

Which means for our asset as example:
  • Looking at the ratio of annual return and downside deviation of 1.14 in the last 5 years of US sectors long worst US sectors, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.58)
  • Compared with SPY (0.81) in the period of the last 3 years, the ratio of annual return and downside deviation of 1.13 is larger, thus better.

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:
  • The Downside risk index over 5 years of US sectors long worst US sectors is 3.62 , which is lower, thus worse compared to the benchmark SPY (3.95 ) in the same period.
  • Looking at Downside risk index in of 3.55 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (4 ).

MaxDD:

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Which means for our asset as example:
  • The maximum reduction from previous high over 5 years of US sectors long worst US sectors is -14.9 days, which is greater, thus better compared to the benchmark SPY (-19.3 days) in the same period.
  • Looking at maximum reduction from previous high in of -14.9 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (-19.3 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'

Which means for our asset as example:
  • Looking at the maximum days below previous high of 129 days in the last 5 years of US sectors long worst US sectors, we see it is relatively lower, thus better in comparison to the benchmark SPY (187 days)
  • Compared with SPY (131 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 129 days is lower, thus better.

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.'

Applying this definition to our asset in some examples:
  • Looking at the average time in days below previous high water mark of 26 days in the last 5 years of US sectors long worst US sectors, we see it is relatively lower, thus better in comparison to the benchmark SPY (39 days)
  • During the last 3 years, the average days below previous high is 34 days, which is higher, thus worse than the value of 33 days from the benchmark.

Performance of US sectors long worst US sectors (YTD)

Historical returns have been extended using synthetic data.

Allocations of US sectors long worst US sectors
()

Allocations

Returns of US sectors long worst US sectors (%)

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