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, 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.'

Which means for our asset as example:
  • The total return over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 295.8%, which is higher, thus better compared to the benchmark QQQ (111.1%) in the same period.
  • During the last 3 years, the total return is 169.2%, which is higher, thus better than the value of 53% from the benchmark.

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 31.7% 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 (16.1%)
  • During the last 3 years, the annual performance (CAGR) is 39.1%, which is greater, thus better than the value of 15.2% from the benchmark.

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:
  • Compared with the benchmark QQQ (24.7%) in the period of the last 5 years, the volatility of 19.4% of NASDAQ 100 Low Volatility Sub-strategy is smaller, thus better.
  • Compared with QQQ (27.8%) in the period of the last 3 years, the volatility of 22.9% is lower, thus better.

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 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 risk in of 15.5% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (20.2%).

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 1.5, which is greater, thus better compared to the benchmark QQQ (0.55) in the same period.
  • Compared with QQQ (0.46) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 1.59 is higher, thus better.

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.'

Applying this definition to our asset in some examples:
  • The downside risk / excess return profile over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 2.22, which is greater, thus better compared to the benchmark QQQ (0.76) in the same period.
  • During the last 3 years, the downside risk / excess return profile is 2.36, which is greater, thus better than the value of 0.63 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:
  • Compared with the benchmark QQQ (8.17 ) in the period of the last 5 years, the Downside risk index of 4.47 of NASDAQ 100 Low Volatility Sub-strategy is lower, thus better.
  • During the last 3 years, the Ulcer Ratio is 5.05 , which is lower, thus better than the value of 9.37 from the benchmark.

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.'

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 (-32.7 days)
  • During the last 3 years, the maximum DrawDown is -29.3 days, which is higher, thus better than the value of -32.7 days from the benchmark.

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 Low Volatility Sub-strategy is 151 days, which is lower, thus better compared to the benchmark QQQ (154 days) in the same period.
  • Compared with QQQ (128 days) in the period of the last 3 years, the maximum days under water of 76 days is lower, thus better.

AveDuration:

'The Average 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. 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:
  • Compared with the benchmark QQQ (32 days) in the period of the last 5 years, the average days under water of 23 days of NASDAQ 100 Low Volatility Sub-strategy is smaller, thus better.
  • Compared with QQQ (29 days) in the period of the last 3 years, the average time in days below previous high water mark of 16 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, 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.