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 155.4%, which is higher, thus better compared to the benchmark SPY (62.6%) in the same period.
  • Looking at total return, or increase in value in of 56.1% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (32.1%).

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.'

Using this definition on our asset we see for example:
  • The compounded annual growth rate (CAGR) over 5 years of US sectors worst US sectors is 20.7%, which is greater, thus better compared to the benchmark SPY (10.2%) in the same period.
  • Looking at compounded annual growth rate (CAGR) in of 16% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (9.7%).

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.'

Using this definition on our asset we see for example:
  • Looking at the volatility of 19.7% 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 (21.5%)
  • Looking at historical 30 days volatility in of 22.3% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (24.8%).

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 risk of 13.3% 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 (15.6%)
  • Looking at downside risk in of 15.2% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (17.9%).

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.'

Which means for our asset as example:
  • The risk / return profile (Sharpe) over 5 years of US sectors worst US sectors is 0.92, which is greater, thus better compared to the benchmark SPY (0.36) in the same period.
  • Compared with SPY (0.29) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.6 is higher, thus better.

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.'

Applying this definition to our asset in some examples:
  • Looking at the ratio of annual return and downside deviation of 1.37 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 (0.5)
  • Compared with SPY (0.4) in the period of the last 3 years, the downside risk / excess return profile of 0.89 is larger, thus better.

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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (8.52 ) in the period of the last 5 years, the Ulcer Index of 6.07 of US sectors worst US sectors is lower, thus better.
  • Compared with SPY (10 ) in the period of the last 3 years, the Ulcer Ratio of 7.33 is lower, thus better.

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.'

Using this definition on our asset we see for example:
  • Looking at the maximum drop from peak to valley of -27.1 days in the last 5 years of US sectors worst US sectors, we see it is relatively higher, thus better in comparison to the benchmark SPY (-33.7 days)
  • During the last 3 years, the maximum DrawDown is -27.1 days, which is larger, thus better than the value of -33.7 days from the benchmark.

MaxDuration:

'The Maximum 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. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Using this definition on our asset we see for example:
  • Looking at the maximum days below previous high of 168 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 (235 days)
  • During the last 3 years, the maximum time in days below previous high water mark is 168 days, which is smaller, thus better than the value of 235 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 (55 days) in the period of the last 5 years, the average time in days below previous high water mark of 34 days of US sectors worst US sectors is lower, thus better.
  • Compared with SPY (59 days) in the period of the last 3 years, the average days below previous high of 39 days is smaller, thus better.

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.