A sub-strategy for the World Top 4 strategy.

'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 investmentâ€™s overall performance.'

Which means for our asset as example:- Looking at the total return of 22.4% 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 (32.9%)
- Looking at total return, or performance in of -9% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (11.6%).

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (5.8%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 4.1% of World Top 4 balanced sub-strategy is smaller, thus worse.
- Looking at compounded annual growth rate (CAGR) in of -3.1% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (3.7%).

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (18%) in the period of the last 5 years, the historical 30 days volatility of 20.3% of World Top 4 balanced sub-strategy is larger, thus worse.
- Looking at volatility in of 23.7% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (20.3%).

'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:- Looking at the downside deviation of 16.2% 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 (13.4%)
- Looking at downside volatility in of 19.6% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (15.3%).

'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.'

Applying this definition to our asset in some examples:- The risk / return profile (Sharpe) over 5 years of World Top 4 balanced sub-strategy is 0.08, which is lower, thus worse compared to the benchmark SPY (0.19) in the same period.
- Looking at ratio of return and volatility (Sharpe) in of -0.24 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.06).

'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.'

Which means for our asset as example:- Looking at the excess return divided by the downside deviation of 0.1 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 (0.25)
- Compared with SPY (0.08) in the period of the last 3 years, the excess return divided by the downside deviation of -0.28 is lower, thus worse.

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (5.17 ) in the period of the last 5 years, the Ulcer Ratio of 5.78 of World Top 4 balanced sub-strategy is greater, thus worse.
- Compared with SPY (5.93 ) in the period of the last 3 years, the Downside risk index of 6.87 is higher, thus worse.

'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:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum DrawDown of -49 days of World Top 4 balanced sub-strategy is lower, thus worse.
- During the last 3 years, the maximum reduction from previous high is -49 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.'

Applying this definition to our asset in some examples:- The maximum time in days below previous high water mark over 5 years of World Top 4 balanced sub-strategy is 106 days, which is smaller, thus better compared to the benchmark SPY (187 days) in the same period.
- Compared with SPY (139 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 89 days is lower, thus better.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (42 days) in the period of the last 5 years, the average days under water of 26 days of World Top 4 balanced sub-strategy is lower, thus better.
- Looking at average time in days below previous high water mark in of 24 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (36 days).

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.