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 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (228.9%) in the period of the last 5 years, the total return, or increase in value of 360.8% of NASDAQ 100 Leaders Sub-strategy is higher, thus better.
  • Looking at total return, or performance in of 168.6% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (119.9%).

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 (26.9%) in the period of the last 5 years, the annual return (CAGR) of 35.8% of NASDAQ 100 Leaders Sub-strategy is larger, thus better.
  • Looking at compounded annual growth rate (CAGR) in of 39.1% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (30.1%).

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:
  • Looking at the 30 days standard deviation of 25% in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively higher, thus worse in comparison to the benchmark QQQ (22.2%)
  • Compared with QQQ (26%) in the period of the last 3 years, the historical 30 days volatility of 29.4% is larger, thus worse.

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 deviation over 5 years of NASDAQ 100 Leaders Sub-strategy is 17.1%, which is larger, thus worse compared to the benchmark QQQ (15.8%) in the same period.
  • During the last 3 years, the downside volatility is 20.4%, which is larger, thus worse than the value of 18.5% 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 1.33 in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively greater, thus better in comparison to the benchmark QQQ (1.1)
  • During the last 3 years, the ratio of return and volatility (Sharpe) is 1.25, which is larger, thus better than the value of 1.06 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.'

Which means for our asset as example:
  • The excess return divided by the downside deviation over 5 years of NASDAQ 100 Leaders Sub-strategy is 1.95, which is higher, thus better compared to the benchmark QQQ (1.55) in the same period.
  • During the last 3 years, the downside risk / excess return profile is 1.79, which is greater, thus better than the value of 1.49 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.'

Using this definition on our asset we see for example:
  • Looking at the Downside risk index of 5.8 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 (5.56 )
  • During the last 3 years, the Ulcer Ratio is 7.25 , which is larger, thus worse than the value of 5.92 from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (-28.6 days) in the period of the last 5 years, the maximum reduction from previous high of -30.7 days of NASDAQ 100 Leaders Sub-strategy is lower, thus worse.
  • Compared with QQQ (-28.6 days) in the period of the last 3 years, the maximum drop from peak to valley of -30.7 days is lower, thus worse.

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 (154 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 96 days of NASDAQ 100 Leaders Sub-strategy is smaller, thus better.
  • During the last 3 years, the maximum time in days below previous high water mark is 96 days, which is greater, thus worse than the value of 82 days from the benchmark.

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 time in days below previous high water mark of 19 days in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively lower, thus better in comparison to the benchmark QQQ (26 days)
  • During the last 3 years, the average days under water is 23 days, which is greater, thus worse than the value of 22 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 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.