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, or increase in value over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 202.1%, which is greater, thus better compared to the benchmark QQQ (174%) in the same period.
  • Looking at total return, or performance in of 97.5% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (96%).

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.'

Which means for our asset as example:
  • The annual return (CAGR) over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 24.7%, which is larger, thus better compared to the benchmark QQQ (22.3%) in the same period.
  • Looking at compounded annual growth rate (CAGR) in of 25.4% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (25.1%).

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:
  • Looking at the historical 30 days volatility of 18.1% 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 (22.1%)
  • Compared with QQQ (26.1%) in the period of the last 3 years, the 30 days standard deviation of 21.1% is smaller, 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.'

Which means for our asset as example:
  • The downside risk over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 12.8%, which is lower, thus better compared to the benchmark QQQ (15.8%) in the same period.
  • During the last 3 years, the downside deviation is 15%, which is lower, thus better than the value of 18.8% from the benchmark.

Sharpe:

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Applying this definition to our asset in some examples:
  • Looking at the risk / return profile (Sharpe) of 1.23 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 (0.9)
  • Compared with QQQ (0.86) in the period of the last 3 years, the risk / return profile (Sharpe) of 1.09 is larger, thus better.

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:
  • Compared with the benchmark QQQ (1.25) in the period of the last 5 years, the excess return divided by the downside deviation of 1.74 of NASDAQ 100 Low Volatility Sub-strategy is greater, thus better.
  • Looking at excess return divided by the downside deviation in of 1.52 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (1.21).

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.'

Applying this definition to our asset in some examples:
  • Looking at the Ulcer Index of 4.73 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 (5.99 )
  • Looking at Ulcer Index in of 5.55 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (6.91 ).

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:
  • Compared with the benchmark QQQ (-28.6 days) in the period of the last 5 years, the maximum DrawDown of -28.5 days of NASDAQ 100 Low Volatility Sub-strategy is greater, thus better.
  • Looking at maximum reduction from previous high in of -28.5 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (-28.6 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) in days.'

Which means for our asset as example:
  • Looking at the maximum days under water of 123 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 (163 days)
  • Looking at maximum days below previous high in of 123 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (154 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 days under water over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 25 days, which is lower, thus better compared to the benchmark QQQ (36 days) in the same period.
  • Looking at average time in days below previous high water mark in of 25 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (35 days).

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations
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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.