Description

The NASDAQ 100 leaders 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.'

Applying this definition to our asset in some examples:
  • The total return, or increase in value over 5 years of NASDAQ 100 Leaders Sub-strategy is 737.3%, which is larger, thus better compared to the benchmark QQQ (139.1%) in the same period.
  • Compared with QQQ (28.5%) in the period of the last 3 years, the total return of 115.7% is larger, thus better.

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:
  • Looking at the annual return (CAGR) of 53.1% in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively larger, thus better in comparison to the benchmark QQQ (19.1%)
  • During the last 3 years, the compounded annual growth rate (CAGR) is 29.3%, which is greater, thus better than the value of 8.7% from the benchmark.

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 historical 30 days volatility over 5 years of NASDAQ 100 Leaders Sub-strategy is 37.1%, which is higher, thus worse compared to the benchmark QQQ (25.4%) in the same period.
  • During the last 3 years, the historical 30 days volatility is 31.1%, which is higher, thus worse than the value of 23.1% from the benchmark.

DownVol:

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

Applying this definition to our asset in some examples:
  • The downside risk over 5 years of NASDAQ 100 Leaders Sub-strategy is 25.1%, 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 20.6%, which is higher, 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.'

Which means for our asset as example:
  • Looking at the Sharpe Ratio of 1.36 in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively higher, thus better in comparison to the benchmark QQQ (0.65)
  • Looking at ratio of return and volatility (Sharpe) in of 0.86 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (0.27).

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.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (0.92) in the period of the last 5 years, the ratio of annual return and downside deviation of 2.01 of NASDAQ 100 Leaders Sub-strategy is higher, thus better.
  • During the last 3 years, the excess return divided by the downside deviation is 1.3, which is greater, thus better than the value of 0.38 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 Ulcer Ratio of 21 of NASDAQ 100 Leaders Sub-strategy is higher, thus worse.
  • Compared with QQQ (17 ) in the period of the last 3 years, the Ulcer Ratio of 23 is larger, thus worse.

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:
  • The maximum drop from peak to valley over 5 years of NASDAQ 100 Leaders Sub-strategy is -45.1 days, which is smaller, thus worse compared to the benchmark QQQ (-35.1 days) in the same period.
  • Looking at maximum drop from peak to valley in of -45.1 days in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to QQQ (-35.1 days).

MaxDuration:

'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 below previous high over 5 years of NASDAQ 100 Leaders Sub-strategy is 507 days, which is higher, thus worse compared to the benchmark QQQ (493 days) in the same period.
  • Looking at maximum days under water in of 507 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to QQQ (493 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.'

Which means for our asset as example:
  • Looking at the average days under water of 133 days in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively greater, thus worse in comparison to the benchmark QQQ (122 days)
  • Compared with QQQ (178 days) in the period of the last 3 years, the average days below previous high of 187 days is larger, thus worse.

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 Leaders 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.