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.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (155.6%) in the period of the last 5 years, the total return, or performance of 189% of NASDAQ 100 Low Volatility Sub-strategy is greater, thus better.
  • During the last 3 years, the total return, or performance is 34.4%, which is lower, thus worse than the value of 41.8% from the benchmark.

CAGR:

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Applying this definition to our asset in some examples:
  • Looking at the annual performance (CAGR) of 23.7% 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 (20.7%)
  • During the last 3 years, the compounded annual growth rate (CAGR) is 10.4%, which is lower, thus worse than the value of 12.4% 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.'

Using this definition on our asset we see for example:
  • Looking at the historical 30 days volatility of 19.4% 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 (25.3%)
  • During the last 3 years, the historical 30 days volatility is 13%, which is lower, thus better than the value of 23.1% 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (17.9%) in the period of the last 5 years, the downside deviation of 13.2% of NASDAQ 100 Low Volatility Sub-strategy is smaller, thus better.
  • During the last 3 years, the downside volatility is 9.1%, which is lower, thus better than the value of 16.1% from the benchmark.

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.'

Which means for our asset as example:
  • Looking at the Sharpe Ratio of 1.09 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 (0.72)
  • Compared with QQQ (0.43) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.61 is greater, 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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (1.02) in the period of the last 5 years, the downside risk / excess return profile of 1.6 of NASDAQ 100 Low Volatility Sub-strategy is higher, thus better.
  • During the last 3 years, the downside risk / excess return profile is 0.87, which is larger, thus better than the value of 0.61 from the benchmark.

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.'

Which means for our asset as example:
  • The Ulcer Index over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 5.79 , which is lower, thus better compared to the benchmark QQQ (14 ) in the same period.
  • During the last 3 years, the Ulcer Index is 5.78 , which is lower, thus better than the value of 17 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.'

Applying this definition to our asset in some examples:
  • 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 greater, thus better in comparison to the benchmark QQQ (-35.1 days)
  • Looking at maximum reduction from previous high in of -13.6 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (-35.1 days).

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 (493 days) in the period of the last 5 years, the maximum days below previous high of 225 days of NASDAQ 100 Low Volatility Sub-strategy is lower, thus better.
  • During the last 3 years, the maximum days below previous high is 225 days, which is smaller, thus better than the value of 493 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.'

Which means for our asset as example:
  • The average time in days below previous high water mark over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 41 days, which is lower, 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 56 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.