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:

'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.'

Using this definition on our asset we see for example:
  • The total return, or increase in value over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 256.6%, which is greater, thus better compared to the benchmark QQQ (231.4%) in the same period.
  • Compared with QQQ (110.6%) in the period of the last 3 years, the total return, or performance of 130.3% 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.'

Applying this definition to our asset in some examples:
  • The annual performance (CAGR) over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 29%, which is larger, thus better compared to the benchmark QQQ (27.1%) in the same period.
  • Looking at annual performance (CAGR) in of 32.1% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (28.2%).

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:
  • Looking at the volatility of 22.1% 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 (22.1%)
  • During the last 3 years, the historical 30 days volatility is 26.3%, which is higher, thus worse than the value of 26.1% from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Looking at the downside deviation of 15.5% 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 (15.7%)
  • Looking at downside risk in of 18.6% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to QQQ (18.6%).

Sharpe:

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Applying this definition to our asset in some examples:
  • The Sharpe Ratio over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 1.2, which is larger, thus better compared to the benchmark QQQ (1.11) in the same period.
  • Compared with QQQ (0.98) in the period of the last 3 years, the risk / return profile (Sharpe) of 1.13 is greater, thus better.

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:
  • Looking at the ratio of annual return and downside deviation of 1.71 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 (1.57)
  • Looking at ratio of annual return and downside deviation in of 1.59 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (1.38).

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.'

Applying this definition to our asset in some examples:
  • Looking at the Ulcer Index of 5 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 (5.53 )
  • During the last 3 years, the Ulcer Index is 6.07 , which is smaller, thus better than the value of 6.82 from the benchmark.

MaxDD:

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Using this definition on our asset we see for example:
  • Looking at the maximum DrawDown 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)
  • Compared with QQQ (-28.6 days) in the period of the last 3 years, the maximum DrawDown of -30.8 days is smaller, thus worse.

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.'

Which means for our asset as example:
  • Looking at the maximum days under water 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)
  • During the last 3 years, the maximum days below previous high is 94 days, which is lower, thus better than the value of 154 days from the benchmark.

AveDuration:

'The Average 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. 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:
  • Compared with the benchmark QQQ (26 days) in the period of the last 5 years, the average days below previous high of 26 days of NASDAQ 100 Balanced Unhedged Sub-strategy is greater, thus worse.
  • 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 (35 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.