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.'

Using this definition on our asset we see for example:- The total return, or increase in value over 5 years of World Top 4 balanced sub-strategy is 74.8%, which is lower, thus worse compared to the benchmark SPY (106.8%) in the same period.
- Looking at total return, or increase in value in of 43.2% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (71.9%).

'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:- The annual return (CAGR) over 5 years of World Top 4 balanced sub-strategy is 11.8%, which is lower, thus worse compared to the benchmark SPY (15.7%) in the same period.
- During the last 3 years, the compounded annual growth rate (CAGR) is 12.7%, which is smaller, thus worse than the value of 19.8% from the benchmark.

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Which means for our asset as example:- Compared with the benchmark SPY (18.9%) in the period of the last 5 years, the historical 30 days volatility of 17.4% of World Top 4 balanced sub-strategy is lower, thus better.
- Looking at 30 days standard deviation in of 20.9% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (21.9%).

'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.'

Applying this definition to our asset in some examples:- The downside risk over 5 years of World Top 4 balanced sub-strategy is 12.9%, which is lower, thus better compared to the benchmark SPY (13.8%) in the same period.
- Looking at downside deviation in of 15.5% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (15.9%).

'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.'

Using this definition on our asset we see for example:- Looking at the ratio of return and volatility (Sharpe) of 0.53 in the last 5 years of World Top 4 balanced sub-strategy, we see it is relatively lower, thus worse in comparison to the benchmark SPY (0.69)
- During the last 3 years, the ratio of return and volatility (Sharpe) is 0.49, which is smaller, thus worse than the value of 0.79 from the benchmark.

'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 0.73, which is lower, thus worse compared to the benchmark SPY (0.95) in the same period.
- Looking at ratio of annual return and downside deviation in of 0.66 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (1.09).

'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:- Looking at the Ulcer Index of 6.33 in the last 5 years of World Top 4 balanced sub-strategy, we see it is relatively higher, thus worse in comparison to the benchmark SPY (5.61 )
- Looking at Ulcer Ratio in of 7.49 in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (6.08 ).

'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:- The maximum drop from peak to valley over 5 years of World Top 4 balanced sub-strategy is -36.1 days, which is lower, thus worse compared to the benchmark SPY (-33.7 days) in the same period.
- During the last 3 years, the maximum DrawDown is -36.1 days, which is smaller, thus worse 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 (139 days) in the period of the last 5 years, the maximum days below previous high of 206 days of World Top 4 balanced sub-strategy is larger, thus worse.
- Compared with SPY (119 days) in the period of the last 3 years, the maximum days under water of 206 days is greater, thus worse.

'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:- Looking at the average days below previous high of 50 days in the last 5 years of World Top 4 balanced sub-strategy, we see it is relatively greater, thus worse in comparison to the benchmark SPY (32 days)
- Compared with SPY (22 days) in the period of the last 3 years, the average time in days below previous high water mark of 50 days is greater, thus worse.

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.