Description of US sectors 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 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:
  • The total return, or performance over 5 years of US sectors worst US sectors is 161.6%, which is higher, thus better compared to the benchmark SPY (61.9%) in the same period.
  • During the last 3 years, the total return, or performance is 58.1%, which is higher, thus better than the value of 41.8% from the benchmark.

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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (10.1%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 21.2% of US sectors worst US sectors is larger, thus better.
  • Looking at annual return (CAGR) in of 16.5% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (12.4%).

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 15.4% in the last 5 years of US sectors worst US sectors, we see it is relatively higher, thus worse in comparison to the benchmark SPY (13.6%)
  • Compared with SPY (12.8%) in the period of the last 3 years, the volatility of 12.9% is larger, thus worse.

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.'

Using this definition on our asset we see for example:
  • The downside volatility over 5 years of US sectors worst US sectors is 16.1%, which is larger, thus worse compared to the benchmark SPY (14.8%) in the same period.
  • Compared with SPY (14.4%) in the period of the last 3 years, the downside risk of 13.7% is lower, 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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (0.56) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 1.21 of US sectors worst US sectors is greater, thus better.
  • Looking at ratio of return and volatility (Sharpe) in of 1.09 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (0.77).

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:
  • The downside risk / excess return profile over 5 years of US sectors worst US sectors is 1.16, which is larger, thus better compared to the benchmark SPY (0.51) in the same period.
  • During the last 3 years, the downside risk / excess return profile is 1.02, which is larger, thus better than the value of 0.68 from the benchmark.

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.'

Using this definition on our asset we see for example:
  • The Ulcer Index over 5 years of US sectors worst US sectors is 3.64 , which is smaller, thus better compared to the benchmark SPY (4.01 ) in the same period.
  • Looking at Downside risk index in of 3.52 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (4.08 ).

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:
  • Compared with the benchmark SPY (-19.3 days) in the period of the last 5 years, the maximum DrawDown of -14.9 days of US sectors worst US sectors is greater, thus better.
  • Compared with SPY (-19.3 days) in the period of the last 3 years, the maximum drop from peak to valley of -14.9 days is greater, 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). 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'

Applying this definition to our asset in some examples:
  • Looking at the maximum days under water of 129 days in the last 5 years of US sectors worst US sectors, we see it is relatively lower, thus better in comparison to the benchmark SPY (187 days)
  • Compared with SPY (139 days) in the period of the last 3 years, the maximum days under water of 124 days is lower, thus better.

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.'

Using this definition on our asset we see for example:
  • Looking at the average days under water of 27 days in the last 5 years of US sectors worst US sectors, we see it is relatively lower, thus better in comparison to the benchmark SPY (41 days)
  • Looking at average days below previous high in of 34 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (35 days).

Performance of US sectors worst US sectors (YTD)

Historical returns have been extended using synthetic data.

Allocations of US sectors worst US sectors
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Allocations

Returns of US sectors 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 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.