Description of NASDAQ 100 Balanced unhedged

The NASDAQ 100 is a sub- strategy that uses proprietary risk-adjusted momentum to pick the most appropriate 4 NASDAQ 100 stocks. It is part for the Nasdaq 100 hedged strategy where it is combined with a variable hedge.

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 of NASDAQ 100 Balanced unhedged (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.'

Using this definition on our asset we see for example:
  • Looking at the total return, or increase in value of 437.1% in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively higher, thus better in comparison to the benchmark QQQ (108.8%)
  • Looking at total return, or increase in value in of 111% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (77.5%).

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (15.9%) in the period of the last 5 years, the annual performance (CAGR) of 40% of NASDAQ 100 Balanced unhedged is higher, thus better.
  • During the last 3 years, the annual return (CAGR) is 28.3%, which is higher, thus better than the value of 21.1% from the benchmark.

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 30 days standard deviation of 24.2% in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively larger, thus worse in comparison to the benchmark QQQ (17.2%)
  • During the last 3 years, the volatility is 22.3%, which is higher, thus worse than the value of 17.2% 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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (19.2%) in the period of the last 5 years, the downside volatility of 26.2% of NASDAQ 100 Balanced unhedged is higher, thus worse.
  • Looking at downside volatility in of 25.2% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to QQQ (19.9%).

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:
  • Compared with the benchmark QQQ (0.78) in the period of the last 5 years, the Sharpe Ratio of 1.55 of NASDAQ 100 Balanced unhedged is larger, thus better.
  • During the last 3 years, the risk / return profile (Sharpe) is 1.15, which is larger, thus better than the value of 1.08 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:
  • Looking at the ratio of annual return and downside deviation of 1.43 in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively larger, thus better in comparison to the benchmark QQQ (0.7)
  • Looking at excess return divided by the downside deviation in of 1.02 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (0.93).

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.'

Using this definition on our asset we see for example:
  • Looking at the Downside risk index of 6.58 in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively higher, thus worse in comparison to the benchmark QQQ (5 )
  • Compared with QQQ (4.97 ) in the period of the last 3 years, the Ulcer Index of 6.17 is higher, thus worse.

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.'

Using this definition on our asset we see for example:
  • The maximum DrawDown over 5 years of NASDAQ 100 Balanced unhedged is -24 days, which is smaller, thus worse compared to the benchmark QQQ (-22.8 days) in the same period.
  • Looking at maximum reduction from previous high in of -19.6 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (-22.8 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'

Using this definition on our asset we see for example:
  • Looking at the maximum days below previous high of 160 days in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively lower, thus better in comparison to the benchmark QQQ (163 days)
  • During the last 3 years, the maximum days below previous high is 160 days, which is greater, thus worse than the value of 154 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.'

Using this definition on our asset we see for example:
  • The average days below previous high over 5 years of NASDAQ 100 Balanced unhedged is 36 days, which is larger, thus worse compared to the benchmark QQQ (35 days) in the same period.
  • Compared with QQQ (30 days) in the period of the last 3 years, the average time in days below previous high water mark of 39 days is greater, thus worse.

Performance of NASDAQ 100 Balanced unhedged (YTD)

Historical returns have been extended using synthetic data.

Allocations of NASDAQ 100 Balanced unhedged
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Allocations

Returns of NASDAQ 100 Balanced unhedged (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of NASDAQ 100 Balanced unhedged 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.