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, 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.'

Using this definition on our asset we see for example:
  • The total return, or increase in value over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 1246.2%, which is higher, thus better compared to the benchmark QQQ (139.1%) in the same period.
  • During the last 3 years, the total return, or performance is 150.5%, which is larger, thus better than the value of 28.5% from the benchmark.

CAGR:

'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:
  • Looking at the annual performance (CAGR) of 68.3% 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 (19.1%)
  • Looking at compounded annual growth rate (CAGR) in of 35.9% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (8.7%).

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.'

Applying this definition to our asset in some examples:
  • The volatility over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 30.7%, which is higher, thus worse compared to the benchmark QQQ (25.4%) in the same period.
  • Looking at 30 days standard deviation in of 26.2% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to QQQ (23.1%).

DownVol:

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

Using this definition on our asset we see for example:
  • The downside risk over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 19.6%, which is larger, thus worse compared to the benchmark QQQ (17.9%) in the same period.
  • During the last 3 years, the downside risk is 16.8%, which is greater, thus worse than the value of 16.2% from the benchmark.

Sharpe:

'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:
  • Compared with the benchmark QQQ (0.65) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 2.14 of NASDAQ 100 Balanced Unhedged Sub-strategy is larger, thus better.
  • Compared with QQQ (0.27) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 1.27 is larger, thus better.

Sortino:

'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:
  • Compared with the benchmark QQQ (0.92) in the period of the last 5 years, the excess return divided by the downside deviation of 3.35 of NASDAQ 100 Balanced Unhedged Sub-strategy is greater, thus better.
  • During the last 3 years, the excess return divided by the downside deviation is 1.99, which is higher, thus better than the value of 0.38 from the benchmark.

Ulcer:

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (14 ) in the period of the last 5 years, the Ulcer Ratio of 7.25 of NASDAQ 100 Balanced Unhedged Sub-strategy is smaller, thus better.
  • Compared with QQQ (17 ) in the period of the last 3 years, the Ulcer Ratio of 7.32 is smaller, thus better.

MaxDD:

'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 QQQ (-35.1 days) in the period of the last 5 years, the maximum DrawDown of -31.2 days of NASDAQ 100 Balanced Unhedged Sub-strategy is higher, thus better.
  • Looking at maximum drop from peak to valley in of -18.1 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (-35.1 days).

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.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (493 days) in the period of the last 5 years, the maximum days under water of 299 days of NASDAQ 100 Balanced Unhedged Sub-strategy is lower, thus better.
  • Compared with QQQ (493 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 299 days is lower, thus better.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (122 days) in the period of the last 5 years, the average days under water of 56 days of NASDAQ 100 Balanced Unhedged Sub-strategy is lower, thus better.
  • Compared with QQQ (178 days) in the period of the last 3 years, the average time in days below previous high water mark of 79 days is lower, thus better.

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, 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.