Description

The NASDAQ 100 is a sub-strategy that uses proprietary risk-adjusted momentum to pick the most appropriate 4 NASDAQ 100 stocks. It is part for the Nasdaq 100 hedged strategy where it is combined with a variable hedge.

Methodology & Assets

The model chooses four individual stocks from the NASDAQ 100 stock index. So depending on what stocks are in the NASDAQ 100, the stock rotation formula might include the new ones.

Statistics (YTD)

What do these metrics mean? [Read More] [Hide]

TotalReturn:

'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 investment’s overall performance.'

Which means for our asset as example:
  • The total return over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 369.3%, which is higher, thus better compared to the benchmark QQQ (116.5%) in the same period.
  • Looking at total return in of 89.4% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to QQQ (95.5%).

CAGR:

'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:
  • Compared with the benchmark QQQ (16.8%) in the period of the last 5 years, the annual performance (CAGR) of 36.4% of NASDAQ 100 Balanced Unhedged Sub-strategy is larger, thus better.
  • Compared with QQQ (25.2%) in the period of the last 3 years, the annual performance (CAGR) of 23.8% is smaller, thus worse.

Volatility:

'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 QQQ (23.4%) in the period of the last 5 years, the volatility of 28.3% of NASDAQ 100 Balanced Unhedged Sub-strategy is greater, thus worse.
  • Looking at historical 30 days volatility in of 25.8% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to QQQ (22.5%).

DownVol:

'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 risk of 18.7% in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively higher, thus worse in comparison to the benchmark QQQ (16.3%)
  • Compared with QQQ (14.9%) in the period of the last 3 years, the downside risk of 17.1% is greater, thus worse.

Sharpe:

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Using this definition on our asset we see for example:
  • Looking at the ratio of return and volatility (Sharpe) of 1.19 in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively higher, thus better in comparison to the benchmark QQQ (0.61)
  • Looking at risk / return profile (Sharpe) in of 0.83 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to QQQ (1.01).

Sortino:

'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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (0.87) in the period of the last 5 years, the downside risk / excess return profile of 1.81 of NASDAQ 100 Balanced Unhedged Sub-strategy is greater, thus better.
  • During the last 3 years, the downside risk / excess return profile is 1.25, which is lower, thus worse than the value of 1.52 from the benchmark.

Ulcer:

'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.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (14 ) in the period of the last 5 years, the Downside risk index of 9.06 of NASDAQ 100 Balanced Unhedged Sub-strategy is lower, thus better.
  • During the last 3 years, the Ulcer Ratio is 9.47 , which is higher, thus worse than the value of 7.9 from the benchmark.

MaxDD:

'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:
  • The maximum reduction from previous high over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is -25.8 days, which is greater, thus better compared to the benchmark QQQ (-35.1 days) in the same period.
  • During the last 3 years, the maximum DrawDown is -25.8 days, which is lower, thus worse than the value of -22.8 days from the benchmark.

MaxDuration:

'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:
  • Looking at the maximum days under water of 299 days in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively lower, thus better in comparison to the benchmark QQQ (493 days)
  • Looking at maximum time in days below previous high water mark in of 139 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to QQQ (190 days).

AveDuration:

'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.'

Applying this definition to our asset in some examples:
  • The average time in days below previous high water mark over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 67 days, which is lower, thus better compared to the benchmark QQQ (121 days) in the same period.
  • During the last 3 years, the average days below previous high is 45 days, which is smaller, thus better than the value of 47 days from the benchmark.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

Allocations

Returns (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of NASDAQ 100 Balanced Unhedged 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.