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:- Looking at the total return of 79.7% 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 (84.3%)
- Looking at total return, or performance in of 22.5% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (37.3%).

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Which means for our asset as example:- Looking at the annual performance (CAGR) of 12.4% 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 (13%)
- Looking at annual return (CAGR) in of 7% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (11.1%).

'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:- The volatility over 5 years of World Top 4 balanced sub-strategy is 17.7%, which is smaller, thus better compared to the benchmark SPY (18.8%) in the same period.
- Compared with SPY (22.3%) in the period of the last 3 years, the 30 days standard deviation of 20.9% is smaller, thus better.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Which means for our asset as example:- Looking at the downside risk of 12.8% 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 (13.7%)
- During the last 3 years, the downside risk is 15.5%, which is lower, thus better than the value of 16.5% from the benchmark.

'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 Sharpe Ratio of 0.56 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 (0.56)
- Looking at Sharpe Ratio in of 0.22 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.39).

'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.'

Using this definition on our asset we see for example:- The excess return divided by the downside deviation over 5 years of World Top 4 balanced sub-strategy is 0.77, which is greater, thus better compared to the benchmark SPY (0.77) in the same period.
- Looking at excess return divided by the downside deviation in of 0.29 in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (0.52).

'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.'

Applying this definition to our asset in some examples:- The Ulcer Index over 5 years of World Top 4 balanced sub-strategy is 6.27 , which is larger, thus worse compared to the benchmark SPY (5.78 ) in the same period.
- Looking at Downside risk index in of 7.87 in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (7.08 ).

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Which means for our asset as example:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum reduction from previous high of -36.1 days of World Top 4 balanced sub-strategy is smaller, thus worse.
- During the last 3 years, the maximum drop from peak to valley is -36.1 days, which is smaller, thus worse than the value of -33.7 days from the benchmark.

'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.'

Which means for our asset as example:- The maximum days under water over 5 years of World Top 4 balanced sub-strategy is 192 days, which is higher, thus worse compared to the benchmark SPY (139 days) in the same period.
- During the last 3 years, the maximum days under water is 192 days, which is higher, thus worse than the value of 139 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.'

Which means for our asset as example:- Compared with the benchmark SPY (37 days) in the period of the last 5 years, the average days below previous high of 43 days of World Top 4 balanced sub-strategy is larger, thus worse.
- During the last 3 years, the average days below previous high is 57 days, which is higher, thus worse than the value of 45 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, 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.