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:

'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, or performance over 5 years of NASDAQ 100 Balanced unhedged is 403.2%, which is greater, thus better compared to the benchmark QQQ (112.9%) in the same period.
  • During the last 3 years, the total return is 218.2%, which is higher, thus better than the value of 74.8% from the benchmark.

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 compounded annual growth rate (CAGR) of 38.2% in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively larger, thus better in comparison to the benchmark QQQ (16.3%)
  • Compared with QQQ (20.5%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 47.1% is greater, thus better.

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 23.9% in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively higher, thus worse in comparison to the benchmark QQQ (16.9%)
  • During the last 3 years, the historical 30 days volatility is 23.5%, which is higher, thus worse than the value of 16.7% from the benchmark.

DownVol:

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

Which means for our asset as example:
  • Compared with the benchmark QQQ (19%) in the period of the last 5 years, the downside volatility of 26% of NASDAQ 100 Balanced unhedged is greater, thus worse.
  • During the last 3 years, the downside deviation is 25.8%, which is larger, thus worse than the value of 19% from the benchmark.

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 (0.82) in the period of the last 5 years, the Sharpe Ratio of 1.49 of NASDAQ 100 Balanced unhedged is larger, thus better.
  • Looking at ratio of return and volatility (Sharpe) in of 1.9 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 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.'

Using this definition on our asset we see for example:
  • Looking at the downside risk / excess return profile of 1.37 in the last 5 years of NASDAQ 100 Balanced unhedged, we see it is relatively higher, thus better in comparison to the benchmark QQQ (0.73)
  • Compared with QQQ (0.94) in the period of the last 3 years, the downside risk / excess return profile of 1.73 is higher, thus better.

Ulcer:

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Which means for our asset as example:
  • The Ulcer Ratio over 5 years of NASDAQ 100 Balanced unhedged is 6.42 , which is greater, thus better compared to the benchmark QQQ (4.93 ) in the same period.
  • During the last 3 years, the Ulcer Index is 5.51 , which is larger, thus better than the value of 4.83 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 drop from peak to valley of -24 days of NASDAQ 100 Balanced unhedged is lower, thus worse.
  • Compared with QQQ (-22.8 days) in the period of the last 3 years, the maximum reduction from previous high of -18.8 days is larger, thus better.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (163 days) in the period of the last 5 years, the maximum days under water of 143 days of NASDAQ 100 Balanced unhedged is lower, thus better.
  • Compared with QQQ (139 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 131 days is lower, thus better.

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:
  • The average days under water over 5 years of NASDAQ 100 Balanced unhedged is 30 days, which is lower, thus better compared to the benchmark QQQ (32 days) in the same period.
  • Looking at average time in days below previous high water mark in of 25 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (26 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.