Description

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 (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.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (213.1%) in the period of the last 5 years, the total return of 273.2% of NASDAQ 100 Balanced Unhedged Sub-strategy is larger, thus better.
  • Compared with QQQ (94.1%) in the period of the last 3 years, the total return, or increase in value of 120.6% is larger, 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.'

Which means for our asset as example:
  • Looking at the annual performance (CAGR) of 30.1% in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively greater, thus better in comparison to the benchmark QQQ (25.6%)
  • Compared with QQQ (24.7%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 30.1% is higher, 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.'

Which means for our asset as example:
  • Looking at the 30 days standard deviation of 20.7% in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively lower, thus better in comparison to the benchmark QQQ (21.9%)
  • Looking at volatility in of 24.5% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (26.2%).

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.'

Which means for our asset as example:
  • The downside deviation over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 14.5%, which is smaller, thus better compared to the benchmark QQQ (15.6%) in the same period.
  • Looking at downside volatility in of 17.5% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (18.8%).

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:
  • Looking at the ratio of return and volatility (Sharpe) of 1.34 in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively higher, thus better in comparison to the benchmark QQQ (1.06)
  • During the last 3 years, the ratio of return and volatility (Sharpe) is 1.13, which is greater, thus better than the value of 0.85 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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (1.48) in the period of the last 5 years, the ratio of annual return and downside deviation of 1.9 of NASDAQ 100 Balanced Unhedged Sub-strategy is larger, thus better.
  • Looking at downside risk / excess return profile in of 1.58 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (1.18).

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (5.49 ) in the period of the last 5 years, the Ulcer Index of 4.9 of NASDAQ 100 Balanced Unhedged Sub-strategy is lower, thus better.
  • Looking at Ulcer Index in of 6.02 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (6.91 ).

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:
  • Looking at the maximum drop from peak to valley of -30.8 days in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively smaller, thus worse in comparison to the benchmark QQQ (-28.6 days)
  • Looking at maximum reduction from previous high in of -30.8 days in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to QQQ (-28.6 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) in days.'

Applying this definition to our asset in some examples:
  • Looking at the maximum days below previous high of 131 days in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively lower, thus better in comparison to the benchmark QQQ (154 days)
  • Compared with QQQ (154 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 94 days is smaller, 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:
  • Compared with the benchmark QQQ (26 days) in the period of the last 5 years, the average days under water of 25 days of NASDAQ 100 Balanced Unhedged Sub-strategy is lower, thus better.
  • Compared with QQQ (35 days) in the period of the last 3 years, the average time in days below previous high water mark of 23 days is lower, thus better.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations
()

Allocations

Returns (%)

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