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.'

Applying this definition to our asset in some examples:
  • The total return, or performance over 5 years of NASDAQ 100 Balanced unhedged is 256.7%, which is greater, thus better compared to the benchmark QQQ (126.3%) in the same period.
  • Compared with QQQ (87%) in the period of the last 3 years, the total return, or performance of 169% is greater, thus better.

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:
  • Compared with the benchmark QQQ (17.8%) in the period of the last 5 years, the annual performance (CAGR) of 29% of NASDAQ 100 Balanced unhedged is larger, thus better.
  • During the last 3 years, the annual performance (CAGR) is 39.1%, which is greater, thus better than the value of 23.2% 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.'

Which means for our asset as example:
  • Looking at the historical 30 days volatility of 15% in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively lower, thus better in comparison to the benchmark QQQ (17.1%)
  • Compared with QQQ (17.3%) in the period of the last 3 years, the 30 days standard deviation of 14.6% is lower, thus better.

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:
  • Looking at the downside deviation of 16.3% in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively lower, thus better in comparison to the benchmark QQQ (19.3%)
  • Looking at downside risk in of 16.2% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to QQQ (20.1%).

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:
  • Looking at the ratio of return and volatility (Sharpe) of 1.77 in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively greater, thus better in comparison to the benchmark QQQ (0.89)
  • Compared with QQQ (1.2) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 2.51 is higher, thus better.

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:
  • The ratio of annual return and downside deviation over 5 years of NASDAQ 100 Balanced unhedged is 1.62, which is higher, thus better compared to the benchmark QQQ (0.79) in the same period.
  • Looking at ratio of annual return and downside deviation in of 2.26 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (1.03).

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:
  • The Ulcer Ratio over 5 years of NASDAQ 100 Balanced unhedged is 3.46 , which is lower, thus better compared to the benchmark QQQ (4.98 ) in the same period.
  • During the last 3 years, the Ulcer Index is 3.03 , which is lower, thus better than the value of 4.97 from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (-22.8 days) in the period of the last 5 years, the maximum reduction from previous high of -15.1 days of NASDAQ 100 Balanced unhedged is higher, thus better.
  • Compared with QQQ (-22.8 days) in the period of the last 3 years, the maximum drop from peak to valley of -15.1 days is higher, thus better.

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:
  • The maximum days below previous high over 5 years of NASDAQ 100 Balanced unhedged is 92 days, which is lower, thus better compared to the benchmark QQQ (163 days) in the same period.
  • Compared with QQQ (154 days) in the period of the last 3 years, the maximum days under water of 68 days is lower, thus better.

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.'

Which means for our asset as example:
  • The average days below previous high over 5 years of NASDAQ 100 Balanced unhedged is 20 days, which is smaller, thus better compared to the benchmark QQQ (35 days) in the same period.
  • During the last 3 years, the average time in days below previous high water mark is 14 days, which is smaller, thus better than the value of 31 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 (%)

  • 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.