Description

The NASDAQ 100 is a sub-strategy.

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:
  • Looking at the total return of 193.3% in the last 5 years of NASDAQ 100 Low Volatility Sub-strategy, we see it is relatively greater, thus better in comparison to the benchmark QQQ (159.1%)
  • Looking at total return, or increase in value in of 34% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to QQQ (37.4%).

CAGR:

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (21%) in the period of the last 5 years, the annual performance (CAGR) of 24.1% of NASDAQ 100 Low Volatility Sub-strategy is higher, thus better.
  • Looking at compounded annual growth rate (CAGR) in of 10.3% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to QQQ (11.2%).

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 volatility over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 19.4%, which is smaller, thus better compared to the benchmark QQQ (25.3%) in the same period.
  • During the last 3 years, the 30 days standard deviation is 13%, which is smaller, thus better than the value of 23.2% from the benchmark.

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 risk over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 13.2%, which is lower, thus better compared to the benchmark QQQ (17.9%) in the same period.
  • Looking at downside volatility in of 9.1% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (16.2%).

Sharpe:

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Which means for our asset as example:
  • The ratio of return and volatility (Sharpe) over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 1.11, which is greater, thus better compared to the benchmark QQQ (0.73) in the same period.
  • Looking at Sharpe Ratio in of 0.6 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (0.38).

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 downside risk / excess return profile over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 1.64, which is higher, thus better compared to the benchmark QQQ (1.03) in the same period.
  • During the last 3 years, the downside risk / excess return profile is 0.86, which is larger, thus better than the value of 0.54 from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Looking at the Ulcer Index of 5.94 in the last 5 years of NASDAQ 100 Low Volatility Sub-strategy, we see it is relatively smaller, thus better in comparison to the benchmark QQQ (14 )
  • During the last 3 years, the Ulcer Ratio is 6.02 , which is lower, thus better than the value of 17 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.'

Applying this definition to our asset in some examples:
  • The maximum reduction from previous high over 5 years of NASDAQ 100 Low Volatility Sub-strategy is -29.3 days, which is higher, thus better 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 DrawDown of -13.6 days is greater, thus better.

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'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (493 days) in the period of the last 5 years, the maximum days below previous high of 273 days of NASDAQ 100 Low Volatility Sub-strategy is smaller, thus better.
  • Looking at maximum days under water in of 273 days in the period of the last 3 years, we see it is relatively smaller, thus better 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.'

Using this definition on our asset we see for example:
  • The average time in days below previous high water mark over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 52 days, which is smaller, thus better compared to the benchmark QQQ (123 days) in the same period.
  • Compared with QQQ (180 days) in the period of the last 3 years, the average days below previous high of 72 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 Low Volatility Sub-strategy are hypothetical and do not account for slippage, fees or taxes.
  • Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.