A sub-strategy for the World Top 4 strategy.

'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 over 5 years of World Top 4 balanced sub-strategy is 101.3%, which is greater, thus better compared to the benchmark SPY (62.6%) in the same period.
- During the last 3 years, the total return, or increase in value is 74%, which is larger, thus better than the value of 32.1% from the benchmark.

'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.'

Applying this definition to our asset in some examples:- Looking at the annual performance (CAGR) of 15% in the last 5 years of World Top 4 balanced sub-strategy, we see it is relatively greater, thus better in comparison to the benchmark SPY (10.2%)
- During the last 3 years, the annual return (CAGR) is 20.2%, which is higher, thus better than the value of 9.7% from the benchmark.

'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:- Compared with the benchmark SPY (21.5%) in the period of the last 5 years, the 30 days standard deviation of 16.8% of World Top 4 balanced sub-strategy is lower, thus better.
- During the last 3 years, the 30 days standard deviation is 19.1%, which is smaller, thus better than the value of 24.8% from the benchmark.

'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:- Compared with the benchmark SPY (15.6%) in the period of the last 5 years, the downside volatility of 12.3% of World Top 4 balanced sub-strategy is smaller, thus better.
- Looking at downside risk in of 14% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (17.9%).

'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:- Compared with the benchmark SPY (0.36) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.75 of World Top 4 balanced sub-strategy is higher, thus better.
- Compared with SPY (0.29) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.93 is larger, thus better.

'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.'

Applying this definition to our asset in some examples:- The ratio of annual return and downside deviation over 5 years of World Top 4 balanced sub-strategy is 1.02, which is larger, thus better compared to the benchmark SPY (0.5) in the same period.
- Compared with SPY (0.4) in the period of the last 3 years, the excess return divided by the downside deviation of 1.27 is larger, thus better.

'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.'

Which means for our asset as example:- Looking at the Downside risk index of 6.42 in the last 5 years of World Top 4 balanced sub-strategy, we see it is relatively lower, thus better in comparison to the benchmark SPY (8.52 )
- Looking at Downside risk index in of 7.26 in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (10 ).

'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.'

Applying this definition to our asset in some examples:- Looking at the maximum drop from peak to valley of -29.7 days in the last 5 years of World Top 4 balanced sub-strategy, we see it is relatively greater, thus better in comparison to the benchmark SPY (-33.7 days)
- During the last 3 years, the maximum DrawDown is -29.7 days, which is higher, thus better than the value of -33.7 days from the benchmark.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (235 days) in the period of the last 5 years, the maximum days under water of 178 days of World Top 4 balanced sub-strategy is lower, thus better.
- During the last 3 years, the maximum days below previous high is 163 days, which is lower, thus better than the value of 235 days from the benchmark.

'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 SPY (55 days) in the period of the last 5 years, the average time in days below previous high water mark of 52 days of World Top 4 balanced sub-strategy is smaller, thus better.
- Compared with SPY (59 days) in the period of the last 3 years, the average time in days below previous high water mark of 39 days is smaller, thus better.

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of World Top 4 balanced sub-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.