Description

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 (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, or performance over 5 years of US sectors worst US sectors is 120.6%, which is higher, thus better compared to the benchmark SPY (97%) in the same period.
  • Looking at total return in of 30.7% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (39.3%).

CAGR:

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Applying this definition to our asset in some examples:
  • The annual performance (CAGR) over 5 years of US sectors worst US sectors is 17.2%, which is larger, thus better compared to the benchmark SPY (14.6%) in the same period.
  • Compared with SPY (11.7%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 9.4% is lower, thus worse.

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.'

Which means for our asset as example:
  • Looking at the volatility of 18.9% 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 (20.9%)
  • Looking at volatility in of 15.5% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (17.5%).

DownVol:

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

Which means for our asset as example:
  • The downside deviation over 5 years of US sectors worst US sectors is 12.8%, which is lower, thus better compared to the benchmark SPY (15%) in the same period.
  • Compared with SPY (12.1%) in the period of the last 3 years, the downside deviation of 10.7% is lower, thus better.

Sharpe:

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Using this definition on our asset we see for example:
  • Looking at the Sharpe Ratio of 0.77 in the last 5 years of US sectors worst US sectors, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.58)
  • Compared with SPY (0.53) in the period of the last 3 years, the Sharpe Ratio of 0.44 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.'

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 worst US sectors, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.8)
  • Compared with SPY (0.76) in the period of the last 3 years, the ratio of annual return and downside deviation of 0.64 is smaller, 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 Ulcer Ratio over 5 years of US sectors worst US sectors is 7.32 , which is lower, thus better compared to the benchmark SPY (9.33 ) in the same period.
  • Looking at Downside risk index in of 8.52 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (10 ).

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:
  • The maximum drop from peak to valley over 5 years of US sectors worst US sectors is -27.1 days, which is larger, thus better compared to the benchmark SPY (-33.7 days) in the same period.
  • Looking at maximum reduction from previous high in of -20.6 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (-24.5 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) in days.'

Which means for our asset as example:
  • The maximum days below previous high over 5 years of US sectors worst US sectors is 472 days, which is lower, thus better compared to the benchmark SPY (488 days) in the same period.
  • During the last 3 years, the maximum days under water is 472 days, which is lower, thus better than the value of 488 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.'

Using this definition on our asset we see for example:
  • The average days below previous high over 5 years of US sectors worst US sectors is 113 days, which is smaller, thus better compared to the benchmark SPY (123 days) in the same period.
  • During the last 3 years, the average days under water is 165 days, which is lower, thus better than the value of 181 days from the benchmark.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

Allocations

Returns (%)

  • Note that yearly returns do not equal 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.