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:

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Which means for our asset as example:
  • The total return, or increase in value over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 1323.5%, which is larger, thus better compared to the benchmark QQQ (111.1%) in the same period.
  • Looking at total return, or increase in value in of 631.2% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (53%).

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.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (16.1%) in the period of the last 5 years, the annual return (CAGR) of 70.2% of NASDAQ 100 Balanced Unhedged Sub-strategy is higher, thus better.
  • Compared with QQQ (15.2%) in the period of the last 3 years, the annual return (CAGR) of 93.9% is larger, thus better.

Volatility:

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Applying this definition to our asset in some examples:
  • The 30 days standard deviation over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 29.7%, which is higher, thus worse compared to the benchmark QQQ (24.7%) in the same period.
  • Looking at volatility in of 34% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to QQQ (27.8%).

DownVol:

'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:
  • Compared with the benchmark QQQ (17.9%) in the period of the last 5 years, the downside deviation of 19.3% of NASDAQ 100 Balanced Unhedged Sub-strategy is higher, thus worse.
  • Looking at downside deviation in of 21.8% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to QQQ (20.2%).

Sharpe:

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Using this definition on our asset we see for example:
  • Looking at the Sharpe Ratio of 2.28 in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively greater, thus better in comparison to the benchmark QQQ (0.55)
  • During the last 3 years, the Sharpe Ratio is 2.69, which is higher, thus better than the value of 0.46 from the benchmark.

Sortino:

'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.'

Applying this definition to our asset in some examples:
  • The excess return divided by the downside deviation over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 3.51, which is higher, thus better compared to the benchmark QQQ (0.76) in the same period.
  • Compared with QQQ (0.63) in the period of the last 3 years, the ratio of annual return and downside deviation of 4.2 is higher, thus better.

Ulcer:

'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.'

Applying this definition to our asset in some examples:
  • Looking at the Ulcer Ratio of 7.78 in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively smaller, thus better in comparison to the benchmark QQQ (8.17 )
  • Compared with QQQ (9.37 ) in the period of the last 3 years, the Downside risk index of 7.66 is lower, thus better.

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:
  • Compared with the benchmark QQQ (-32.7 days) in the period of the last 5 years, the maximum DrawDown of -31.2 days of NASDAQ 100 Balanced Unhedged Sub-strategy is greater, thus better.
  • Looking at maximum reduction from previous high in of -31.2 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (-32.7 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.'

Applying this definition to our asset in some examples:
  • The maximum days under water over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 175 days, which is higher, thus worse compared to the benchmark QQQ (154 days) in the same period.
  • Compared with QQQ (128 days) in the period of the last 3 years, the maximum days under water of 152 days is larger, thus worse.

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:
  • Looking at the average days under water of 36 days in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively greater, thus worse in comparison to the benchmark QQQ (32 days)
  • During the last 3 years, the average time in days below previous high water mark is 30 days, which is higher, thus worse than the value of 29 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, 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.