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.

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Statistics (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:
  • Compared with the benchmark QQQ (119.6%) in the period of the last 5 years, the total return of 192.7% of NASDAQ 100 Balanced Unhedged Sub-strategy is larger, thus better.
  • Compared with QQQ (59.9%) in the period of the last 3 years, the total return, or increase in value of 96.3% is greater, thus better.

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.'

Which means for our asset as example:
  • Looking at the annual performance (CAGR) of 24% 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 (17.1%)
  • During the last 3 years, the annual performance (CAGR) is 25.2%, which is greater, thus better than the value of 16.9% from the benchmark.

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 volatility of 24.7% in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively larger, thus worse in comparison to the benchmark QQQ (24.6%)
  • Compared with QQQ (27.7%) in the period of the last 3 years, the volatility of 29.3% is larger, thus worse.

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.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (17.8%) in the period of the last 5 years, the downside risk of 17.4% of NASDAQ 100 Balanced Unhedged Sub-strategy is lower, thus better.
  • Looking at downside volatility in of 20.7% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to QQQ (20.1%).

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:
  • The risk / return profile (Sharpe) over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 0.87, which is larger, thus better compared to the benchmark QQQ (0.59) in the same period.
  • Compared with QQQ (0.52) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.78 is higher, thus better.

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 ratio of annual return and downside deviation of 1.24 in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively larger, thus better in comparison to the benchmark QQQ (0.82)
  • Compared with QQQ (0.72) in the period of the last 3 years, the excess return divided by the downside deviation of 1.1 is greater, 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:
  • Compared with the benchmark QQQ (8.04 ) in the period of the last 5 years, the Ulcer Index of 7.81 of NASDAQ 100 Balanced Unhedged Sub-strategy is smaller, thus better.
  • During the last 3 years, the Ulcer Index is 9.75 , which is larger, thus worse than the value of 9.19 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:
  • The maximum DrawDown over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is -30.8 days, which is larger, thus better compared to the benchmark QQQ (-32.7 days) in the same period.
  • Compared with QQQ (-32.7 days) in the period of the last 3 years, the maximum drop from peak to valley of -30.8 days is greater, 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) in days.'

Which means for our asset as example:
  • The maximum days below previous high over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 162 days, which is higher, thus worse compared to the benchmark QQQ (154 days) in the same period.
  • During the last 3 years, the maximum days below previous high is 162 days, which is higher, thus worse than the value of 125 days from the benchmark.

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 (32 days) in the period of the last 5 years, the average days below previous high of 31 days of NASDAQ 100 Balanced Unhedged Sub-strategy is lower, thus better.
  • During the last 3 years, the average days under water is 39 days, which is larger, thus worse than the value of 28 days from the benchmark.

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.