Description

The World Country Top 4 Strategy is a momentum driven strategy that invests in the top four single country ETFs. It will add geographic diversity to your portfolio with significant non-U.S. equity exposure.

The strategy consists of four sub-strategies. Each sub-strategy invests in the best country ETF in a specific geographic area (i.e., Africa, Asia, Latin America, etc). These strategies are then combined to yield four country ETFs that come from different geographic segments, thus avoiding overconcentration. So even if one region is outperforming all the other areas, this strategy will still diversify among three additional top performing regions.

Like our other equity-based strategies, this strategy is hedged with a sub-strategy (HEDGE) that includes, amongst others, safe heaven assets like treasuries and gold.

Methodology & Assets

Country ETFs:

  • AFK Market Vectors Africa Index
  • ASHR Deutsche X-Trackers CSI 300 China A Shares
  • ECH iShares MSCI Chile Fund
  • EGPT Market Vectors Egypt Index
  • EIDO iShares MSCI Indonesia Index
  • EIRL iShares MSCI Ireland Capped
  • EIS iShares MSCI Israel
  • ENZL iShares MSCI New Zealand Investable Market
  • EPHE iShares MSCI Philippines
  • EPI WisdomTree India Earnings Index
  • EPOL iShares MSCI Poland Index
  • EPU iShares MSCI Peru Index
  • EWA iShares MSCI Australia Index Fund
  • EWC iShares MSCI Canada Index Fund
  • EWD iShares MSCI Sweden Index
  • EWG iShares MSCI Germany Index
  • EWH iShares MSCI Hong Kong Index Fund
  • EWI iShares MSCI Italy Index
  • EWJ iShares MSCI Japan Index Fund
  • EWK iShares MSCI Belgium Index
  • EWL iShares MSCI Switzerland
  • EWM iShares MSCI Malaysia Index Fund
  • EWN iShares MSCI Netherlands Index
  • EWO iShares MSCI Austria Index
  • EWP iShares MSCI Spain Index
  • EWQ iShares MSCI France
  • EWS iShares MSCI Singapore Index
  • EWT iShares MSCI Taiwan Index Fund
  • EWU iShares MSCI United Kingdom Index
  • EWW iShares MSCI Mexico Index Fund
  • EWY iShares MSCI South Korea Index Fund
  • EWZ iShares MSCI Brazil Index Fund
  • EZA iShares MSCI South Africa Index
  • FM iShares MSCI Frontier Markets ETF
  • FRN Guggenheim BNY Mellon Frontier Mkts
  • FXI iShares FTSE China 25 Index Fund
  • GAF SPDR S&P E.M. Middle East & Africa
  • GULF WisdomTree Middle East Dividend Index
  • GREK Global X FTSE Greece 20
  • GXG Global X Interbolsa FTSE Colombia 20
  • IDX Market Vectors Indonesia
  • MCHI iShares MSCI China Index
  • MES Market Vectors DJ Gulf States (GCC) Titans
  • NORW Global X FTSE Norway 30 ETF
  • QQQ PowerShares Nasdaq-100 Index
  • RSX Market Vectors DAXglobal Russia
  • THD iShares MSCI Thailand Index
  • TUR iShares MSCI Turkey
  • VNM Market Vectors Vietnam

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.'

Which means for our asset as example:
  • Looking at the total return, or performance of 60.4% in the last 5 years of World Top 4 Strategy, we see it is relatively larger, thus better in comparison to the benchmark ACWI (60.1%)
  • During the last 3 years, the total return is 22.9%, which is higher, thus better than the value of 20.5% 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.'

Using this definition on our asset we see for example:
  • The annual performance (CAGR) over 5 years of World Top 4 Strategy is 9.9%, which is higher, thus better compared to the benchmark ACWI (9.9%) in the same period.
  • Compared with ACWI (6.4%) in the period of the last 3 years, the annual return (CAGR) of 7.1% is greater, thus better.

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:
  • Compared with the benchmark ACWI (18.3%) in the period of the last 5 years, the 30 days standard deviation of 8.2% of World Top 4 Strategy is lower, thus better.
  • Looking at 30 days standard deviation in of 9.5% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to ACWI (21.2%).

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.'

Using this definition on our asset we see for example:
  • The downside risk over 5 years of World Top 4 Strategy is 5.9%, which is smaller, thus better compared to the benchmark ACWI (13.6%) in the same period.
  • Looking at downside risk in of 7% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to ACWI (16%).

Sharpe:

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Applying this definition to our asset in some examples:
  • Looking at the ratio of return and volatility (Sharpe) of 0.9 in the last 5 years of World Top 4 Strategy, we see it is relatively greater, thus better in comparison to the benchmark ACWI (0.4)
  • Looking at risk / return profile (Sharpe) in of 0.49 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to ACWI (0.18).

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:
  • The downside risk / excess return profile over 5 years of World Top 4 Strategy is 1.26, which is greater, thus better compared to the benchmark ACWI (0.54) in the same period.
  • During the last 3 years, the ratio of annual return and downside deviation is 0.66, which is higher, thus better than the value of 0.25 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:
  • The Downside risk index over 5 years of World Top 4 Strategy is 2.38 , which is lower, thus better compared to the benchmark ACWI (6.61 ) in the same period.
  • Compared with ACWI (7.98 ) in the period of the last 3 years, the Ulcer Index of 2.89 is smaller, 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.'

Which means for our asset as example:
  • Looking at the maximum DrawDown of -17.1 days in the last 5 years of World Top 4 Strategy, we see it is relatively higher, thus better in comparison to the benchmark ACWI (-33.5 days)
  • During the last 3 years, the maximum DrawDown is -17.1 days, which is larger, thus better than the value of -33.5 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.'

Applying this definition to our asset in some examples:
  • Looking at the maximum time in days below previous high water mark of 165 days in the last 5 years of World Top 4 Strategy, we see it is relatively lower, thus better in comparison to the benchmark ACWI (373 days)
  • Compared with ACWI (373 days) in the period of the last 3 years, the maximum days under water of 165 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:
  • Compared with the benchmark ACWI (90 days) in the period of the last 5 years, the average days under water of 35 days of World Top 4 Strategy is lower, thus better.
  • Compared with ACWI (120 days) in the period of the last 3 years, the average time in days below previous high water mark of 37 days is lower, thus better.

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 World Top 4 Strategy 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.