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Long Term Rotation Strategy With Calmar Ratio Scoring

Summary

Calmar Ratio is another way to score funds for rotation strategies

Calmar Ratio compares returns to maximum drawdown as a measure of performance

The Calmar Ratio is a comparison of the returns over a specific period of time, compared to the maximum drawdown suffered during that time period. There are many ratios, such as the Sharpe Ratio, that compare returns to risk, the Calmar Ratio is another ratio that attempts to do this. Unlike the Sharpe Ratio, the Calmar ratio compares returns (Sharpe and Calmar do calculate returns differently, but ultimately it is something akin to returns over a period of time) to the maximum drawdown instead of volatility, giving investors another way to measure risk in a market. Below we have put together a simple strategy using our Advanced Rotation tool that rotates between US Large Cap, US Mid Cap, Total World, and Long Term US Government Bonds, using 50% 3-month momentum and 50% 65 day Calmar Ratio as the criterion for determining which fund is the strongest, and thus gets chosen.

Settings:
Rotating between US Large Cap, US Mid Cap, Total World Fund, Long Term US Government Bonds
50% 3-month momentum, 50% 65 day Calmar Ratio