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:

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Using this definition on our asset we see for example:
  • The total return over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 180.2%, which is smaller, thus worse compared to the benchmark QQQ (228.9%) in the same period.
  • Compared with QQQ (119.9%) in the period of the last 3 years, the total return, or performance of 66.7% is lower, thus worse.

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 performance (CAGR) of 22.9% in the last 5 years of NASDAQ 100 Low Volatility Sub-strategy, we see it is relatively lower, thus worse in comparison to the benchmark QQQ (26.9%)
  • Looking at compounded annual growth rate (CAGR) in of 18.6% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to QQQ (30.1%).

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:
  • Looking at the volatility of 18% 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 (22.2%)
  • During the last 3 years, the historical 30 days volatility is 21.1%, which is smaller, thus better than the value of 26% from the benchmark.

DownVol:

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

Applying this definition to our asset in some examples:
  • The downside deviation over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 12.7%, 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 15.1%, which is lower, thus better than the value of 18.5% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • The Sharpe Ratio over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 1.14, which is larger, thus better compared to the benchmark QQQ (1.1) in the same period.
  • During the last 3 years, the Sharpe Ratio is 0.76, which is lower, thus worse than the value of 1.06 from the benchmark.

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 (1.55) in the period of the last 5 years, the ratio of annual return and downside deviation of 1.61 of NASDAQ 100 Low Volatility Sub-strategy is larger, thus better.
  • During the last 3 years, the ratio of annual return and downside deviation is 1.07, which is lower, thus worse than the value of 1.49 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.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (5.56 ) in the period of the last 5 years, the Downside risk index of 5.34 of NASDAQ 100 Low Volatility Sub-strategy is smaller, thus better.
  • Compared with QQQ (5.92 ) in the period of the last 3 years, the Ulcer Index of 6.01 is larger, thus worse.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (-28.6 days) in the period of the last 5 years, the maximum reduction from previous high of -28.5 days of NASDAQ 100 Low Volatility Sub-strategy is larger, 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 greater, thus better in comparison to QQQ (-28.6 days).

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 under water over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 210 days, which is higher, thus worse compared to the benchmark QQQ (154 days) in the same period.
  • Looking at maximum days under water in of 210 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to QQQ (82 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.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (26 days) in the period of the last 5 years, the average days below previous high of 39 days of NASDAQ 100 Low Volatility Sub-strategy is greater, thus worse.
  • During the last 3 years, the average time in days below previous high water mark is 46 days, which is greater, thus worse than the value of 22 days from the benchmark.

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.