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 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:
  • The total return, or increase in value over 5 years of NASDAQ 100 Balanced unhedged is 440.3%, which is greater, thus better compared to the benchmark QQQ (117.1%) in the same period.
  • Compared with QQQ (75.6%) in the period of the last 3 years, the total return of 218.8% is higher, thus better.

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.'

Using this definition on our asset we see for example:
  • The annual performance (CAGR) over 5 years of NASDAQ 100 Balanced unhedged is 40.2%, which is greater, thus better compared to the benchmark QQQ (16.8%) in the same period.
  • Looking at annual return (CAGR) in of 47.3% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (20.7%).

Volatility:

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Which means for our asset as example:
  • The volatility over 5 years of NASDAQ 100 Balanced unhedged is 24.1%, which is higher, thus worse compared to the benchmark QQQ (16.9%) in the same period.
  • Looking at historical 30 days volatility in of 24% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to QQQ (16.8%).

DownVol:

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. 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:
  • Looking at the downside risk of 26.3% in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively larger, thus worse in comparison to the benchmark QQQ (19%)
  • Looking at downside deviation in of 26.5% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to QQQ (19.5%).

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.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (0.85) in the period of the last 5 years, the Sharpe Ratio of 1.56 of NASDAQ 100 Balanced unhedged is larger, thus better.
  • Looking at ratio of return and volatility (Sharpe) in of 1.87 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (1.08).

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.'

Using this definition on our asset we see for example:
  • Looking at the excess return divided by the downside deviation of 1.43 in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively greater, thus better in comparison to the benchmark QQQ (0.75)
  • During the last 3 years, the excess return divided by the downside deviation is 1.69, which is larger, thus better than the value of 0.93 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (4.91 ) in the period of the last 5 years, the Ulcer Index of 6.42 of NASDAQ 100 Balanced unhedged is larger, thus better.
  • During the last 3 years, the Ulcer Index is 5.74 , which is higher, thus better than the value of 4.8 from the benchmark.

MaxDD:

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Using this definition on our asset we see for example:
  • Looking at the maximum drop from peak to valley of -24 days in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively lower, thus worse in comparison to the benchmark QQQ (-22.8 days)
  • Looking at maximum DrawDown in of -18.8 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (-22.8 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.'

Using this definition on our asset we see for example:
  • Looking at the maximum days under water 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 higher, thus worse than the value of 154 days from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (34 days) in the period of the last 5 years, the average days under water of 32 days of NASDAQ 100 Balanced unhedged is smaller, thus better.
  • During the last 3 years, the average days under water is 31 days, which is higher, thus worse than the value of 28 days from the benchmark.

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 (%)

  • "Year" returns in the table above are not equal to 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.