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:
  • The total return over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 287.1%, which is larger, thus better compared to the benchmark QQQ (151.5%) in the same period.
  • Compared with QQQ (88.4%) in the period of the last 3 years, the total return, or performance of 145.3% 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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (20.3%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 31.1% of NASDAQ 100 Balanced Unhedged Sub-strategy is greater, thus better.
  • Looking at compounded annual growth rate (CAGR) in of 34.9% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (23.5%).

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (21.7%) in the period of the last 5 years, the historical 30 days volatility of 19.2% of NASDAQ 100 Balanced Unhedged Sub-strategy is lower, thus better.
  • During the last 3 years, the historical 30 days volatility is 21.6%, which is smaller, thus better than the value of 24.7% from the benchmark.

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:
  • The downside deviation over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 13.2%, which is lower, thus better compared to the benchmark QQQ (15.5%) in the same period.
  • Looking at downside deviation in of 15% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (17.7%).

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.'

Which means for our asset as example:
  • The ratio of return and volatility (Sharpe) over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 1.49, which is higher, thus better compared to the benchmark QQQ (0.82) in the same period.
  • During the last 3 years, the Sharpe Ratio is 1.5, which is larger, thus better than the value of 0.85 from the benchmark.

Sortino:

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Which means for our asset as example:
  • The ratio of annual return and downside deviation over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 2.17, which is higher, thus better compared to the benchmark QQQ (1.14) in the same period.
  • Looking at excess return divided by the downside deviation in of 2.17 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (1.19).

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:
  • Compared with the benchmark QQQ (5.99 ) in the period of the last 5 years, the Ulcer Ratio of 4.94 of NASDAQ 100 Balanced Unhedged Sub-strategy is smaller, thus better.
  • Compared with QQQ (6.6 ) in the period of the last 3 years, the Downside risk index of 5.6 is lower, thus better.

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.'

Using this definition on our asset we see for example:
  • The maximum reduction from previous high over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is -30.4 days, which is lower, thus worse compared to the benchmark QQQ (-28.6 days) in the same period.
  • Compared with QQQ (-28.6 days) in the period of the last 3 years, the maximum drop from peak to valley of -30.4 days is smaller, thus worse.

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:
  • Looking at the maximum time in days below previous high water mark of 94 days in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively smaller, thus better in comparison to the benchmark QQQ (163 days)
  • Looking at maximum days under water in of 94 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (154 days).

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.'

Using this definition on our asset we see for example:
  • Looking at the average days under water of 20 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 (36 days)
  • Looking at average time in days below previous high water mark in of 21 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to QQQ (33 days).

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations
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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.