A sub-strategy for the World Top 4 strategy.

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Using this definition on our asset we see for example:- Looking at the total return, or increase in value of 176.3% 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 (110.3%)
- Compared with SPY (39.7%) in the period of the last 3 years, the total return, or performance of 51.2% is higher, thus better.

'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:- Compared with the benchmark SPY (16.1%) in the period of the last 5 years, the annual performance (CAGR) of 22.6% of World Top 4 balanced sub-strategy is larger, thus better.
- Looking at annual performance (CAGR) in of 14.8% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (11.8%).

'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 16.7% 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 (20.9%)
- During the last 3 years, the volatility is 13.1%, which is smaller, thus better than the value of 17.5% 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.'

Which means for our asset as example:- Compared with the benchmark SPY (14.9%) in the period of the last 5 years, the downside deviation of 12% of World Top 4 balanced sub-strategy is smaller, thus better.
- Looking at downside risk in of 8.8% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (12.2%).

'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:- Compared with the benchmark SPY (0.65) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 1.2 of World Top 4 balanced sub-strategy is larger, thus better.
- Looking at risk / return profile (Sharpe) in of 0.94 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.53).

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Using this definition on our asset we see for example:- The ratio of annual return and downside deviation over 5 years of World Top 4 balanced sub-strategy is 1.68, which is higher, thus better compared to the benchmark SPY (0.91) in the same period.
- Looking at downside risk / excess return profile in of 1.39 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.76).

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Applying this definition to our asset in some examples:- The Ulcer Ratio over 5 years of World Top 4 balanced sub-strategy is 6.09 , which is lower, thus better compared to the benchmark SPY (9.32 ) in the same period.
- Compared with SPY (10 ) in the period of the last 3 years, the Ulcer Index of 5.52 is lower, thus better.

'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 -29.7 days, which is greater, thus better compared to the benchmark SPY (-33.7 days) in the same period.
- Looking at maximum drop from peak to valley in of -17 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (-24.5 days).

'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.'

Applying this definition to our asset in some examples:- The maximum days below previous high over 5 years of World Top 4 balanced sub-strategy is 247 days, which is smaller, thus better compared to the benchmark SPY (488 days) in the same period.
- Looking at maximum days below previous high in of 247 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (488 days).

'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.'

Which means for our asset as example:- Looking at the average time in days below previous high water mark of 46 days 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 (124 days)
- During the last 3 years, the average time in days below previous high water mark is 61 days, which is lower, thus better than the value of 179 days from the benchmark.

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 and do not account for slippage, fees or taxes.
- Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.