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:
  • The total return over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 288.9%, which is greater, 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 143.4% is higher, thus better.

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:
  • Looking at the compounded annual growth rate (CAGR) of 31.3% in the last 5 years of NASDAQ 100 Low Volatility Sub-strategy, we see it is relatively higher, thus better in comparison to the benchmark QQQ (13.2%)
  • Compared with QQQ (11.9%) in the period of the last 3 years, the annual return (CAGR) of 34.5% is greater, thus better.

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 30 days standard deviation over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 20%, which is lower, thus better compared to the benchmark QQQ (26.3%) in the same period.
  • During the last 3 years, the 30 days standard deviation is 23.3%, which is lower, thus better than the value of 29.8% from the benchmark.

DownVol:

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

Which means for our asset as example:
  • The downside deviation over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 13.6%, which is lower, thus better compared to the benchmark QQQ (18.9%) in the same period.
  • Looking at downside volatility in of 15.8% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (21.3%).

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 risk / return profile (Sharpe) of 1.44 in the last 5 years of NASDAQ 100 Low Volatility Sub-strategy, we see it is relatively higher, thus better in comparison to the benchmark QQQ (0.41)
  • Looking at risk / return profile (Sharpe) in of 1.37 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, 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (0.57) in the period of the last 5 years, the ratio of annual return and downside deviation of 2.12 of NASDAQ 100 Low Volatility Sub-strategy is higher, thus better.
  • During the last 3 years, the downside risk / excess return profile is 2.03, which is greater, thus better than the value of 0.44 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:
  • The Ulcer Ratio over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 4.58 , which is lower, thus better compared to the benchmark QQQ (13 ) in the same period.
  • Looking at Ulcer Ratio in of 5.45 in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to QQQ (16 ).

MaxDD:

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Which means for our asset as example:
  • Looking at the maximum drop from peak to valley of -29.3 days in the last 5 years of NASDAQ 100 Low Volatility Sub-strategy, we see it is relatively larger, thus better in comparison to the benchmark QQQ (-35.1 days)
  • During the last 3 years, the maximum DrawDown is -29.3 days, which is larger, thus better than the value of -35.1 days from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (276 days) in the period of the last 5 years, the maximum days below previous high of 108 days of NASDAQ 100 Low Volatility Sub-strategy is lower, thus better.
  • Compared with QQQ (276 days) in the period of the last 3 years, the maximum days below previous high of 79 days is lower, thus better.

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 22 days in the last 5 years of NASDAQ 100 Low Volatility Sub-strategy, we see it is relatively lower, thus better in comparison to the benchmark QQQ (58 days)
  • Looking at average days below previous high in of 21 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (70 days).

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, 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.