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.'

Which means for our asset as example:
  • Looking at the total return of 501.6% in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively greater, thus better in comparison to the benchmark QQQ (115.8%)
  • Looking at total return, or increase in value in of 156.8% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (67.7%).

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 (16.6%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 43.2% of NASDAQ 100 Balanced unhedged is larger, thus better.
  • Looking at annual performance (CAGR) in of 37.1% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (18.9%).

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 30 days standard deviation over 5 years of NASDAQ 100 Balanced unhedged is 23.9%, which is larger, thus worse compared to the benchmark QQQ (17.3%) in the same period.
  • Looking at 30 days standard deviation in of 23.3% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to QQQ (17.4%).

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.'

Applying this definition to our asset in some examples:
  • Looking at the downside deviation of 26.4% in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively greater, thus worse in comparison to the benchmark QQQ (19.3%)
  • Compared with QQQ (19.8%) in the period of the last 3 years, the downside deviation of 25.8% is greater, thus worse.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (0.82) in the period of the last 5 years, the Sharpe Ratio of 1.71 of NASDAQ 100 Balanced unhedged is larger, thus better.
  • Looking at Sharpe Ratio in of 1.48 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (0.94).

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.'

Applying this definition to our asset in some examples:
  • Looking at the ratio of annual return and downside deviation of 1.54 in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively greater, thus better in comparison to the benchmark QQQ (0.73)
  • During the last 3 years, the ratio of annual return and downside deviation is 1.34, which is higher, thus better than the value of 0.83 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.'

Using this definition on our asset we see for example:
  • Looking at the Ulcer Ratio of 6.67 in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively greater, thus worse in comparison to the benchmark QQQ (5.01 )
  • Looking at Ulcer Index in of 6.37 in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to QQQ (5 ).

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:
  • 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.
  • Compared with QQQ (-22.8 days) in the period of the last 3 years, the maximum drop from peak to valley of -19.6 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'

Applying this definition to our asset in some examples:
  • The maximum days under water over 5 years of NASDAQ 100 Balanced unhedged is 160 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 time in days below previous high water mark of 160 days is larger, thus worse.

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:
  • Looking at the average days below previous high of 36 days in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively higher, thus worse in comparison to the benchmark QQQ (35 days)
  • Looking at average time in days below previous high water mark in of 39 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to QQQ (30 days).

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.