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.'

Which means for our asset as example:
  • The total return over 5 years of NASDAQ 100 Leaders Sub-strategy is 715.7%, which is larger, thus better compared to the benchmark QQQ (85.7%) in the same period.
  • Compared with QQQ (40%) in the period of the last 3 years, the total return, or increase in value of 206.8% is higher, thus better.

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:
  • Looking at the annual return (CAGR) of 52.3% 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 (13.2%)
  • Looking at annual return (CAGR) in of 45.3% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (11.9%).

Volatility:

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Using this definition on our asset we see for example:
  • The volatility over 5 years of NASDAQ 100 Leaders Sub-strategy is 36.9%, which is higher, thus worse compared to the benchmark QQQ (26.3%) in the same period.
  • Compared with QQQ (29.8%) in the period of the last 3 years, the historical 30 days volatility of 42.1% is larger, thus worse.

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:
  • The downside deviation over 5 years of NASDAQ 100 Leaders Sub-strategy is 25.2%, which is higher, thus worse compared to the benchmark QQQ (18.9%) in the same period.
  • Compared with QQQ (21.3%) in the period of the last 3 years, the downside risk of 29% is greater, thus worse.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (0.41) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.35 of NASDAQ 100 Leaders Sub-strategy is greater, thus better.
  • Looking at Sharpe Ratio in of 1.02 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (0.31).

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.'

Which means for our asset as example:
  • The downside risk / excess return profile over 5 years of NASDAQ 100 Leaders Sub-strategy is 1.97, which is larger, thus better compared to the benchmark QQQ (0.57) in the same period.
  • Looking at downside risk / excess return profile in of 1.47 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (0.44).

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.'

Applying this definition to our asset in some examples:
  • Looking at the Ulcer Index of 19 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 (13 )
  • Looking at Ulcer Index in of 23 in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to QQQ (16 ).

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.'

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 lower, thus worse compared to the benchmark QQQ (-35.1 days) in the same period.
  • Compared with QQQ (-35.1 days) in the period of the last 3 years, the maximum drop from peak to valley of -45.1 days is smaller, 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). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Which means for our asset as example:
  • Compared with the benchmark QQQ (276 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 300 days of NASDAQ 100 Leaders Sub-strategy is greater, thus worse.
  • Compared with QQQ (276 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 300 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:
  • Compared with the benchmark QQQ (58 days) in the period of the last 5 years, the average time in days below previous high water mark of 76 days of NASDAQ 100 Leaders Sub-strategy is larger, thus worse.
  • Compared with QQQ (70 days) in the period of the last 3 years, the average days below previous high of 92 days is greater, 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.