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.'

Which means for our asset as example:
  • Looking at the total return, or performance of 1268.4% 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 (90.1%)
  • During the last 3 years, the total return is 562.5%, which is larger, thus better than the value of 41.1% from the benchmark.

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:
  • The compounded annual growth rate (CAGR) over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 68.9%, which is greater, thus better compared to the benchmark QQQ (13.7%) in the same period.
  • Compared with QQQ (12.1%) in the period of the last 3 years, the annual performance (CAGR) of 87.7% is larger, thus better.

Volatility:

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Which means for our asset as example:
  • The 30 days standard deviation over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 29.8%, which is larger, thus worse compared to the benchmark QQQ (26.1%) in the same period.
  • Looking at 30 days standard deviation in of 34.1% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to QQQ (29.5%).

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.'

Using this definition on our asset we see for example:
  • The downside volatility over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 19.4%, which is larger, thus worse compared to the benchmark QQQ (18.7%) in the same period.
  • During the last 3 years, the downside deviation is 21.9%, which is greater, thus worse than the value of 21.1% from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Looking at the ratio of return and volatility (Sharpe) of 2.23 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 (0.43)
  • Looking at risk / return profile (Sharpe) in of 2.49 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (0.33).

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.'

Using this definition on our asset we see for example:
  • The excess return divided by the downside deviation over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 3.43, which is greater, thus better compared to the benchmark QQQ (0.6) in the same period.
  • Compared with QQQ (0.46) in the period of the last 3 years, the ratio of annual return and downside deviation of 3.89 is greater, thus better.

Ulcer:

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Applying this definition to our asset in some examples:
  • The Ulcer Index over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 8.12 , which is smaller, thus better compared to the benchmark QQQ (12 ) in the same period.
  • During the last 3 years, the Ulcer Index is 8.3 , which is lower, thus better than the value of 14 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.'

Applying this definition to our asset in some examples:
  • Looking at the maximum reduction from previous high of -31.2 days 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 (-35.1 days)
  • During the last 3 years, the maximum reduction from previous high is -31.2 days, which is higher, thus better than the value of -35.1 days from the benchmark.

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 264 days, which is larger, thus worse compared to the benchmark QQQ (240 days) in the same period.
  • Looking at maximum days under water in of 264 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to QQQ (240 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.'

Applying this definition to our asset in some examples:
  • The average time in days below previous high water mark over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 55 days, which is larger, thus worse compared to the benchmark QQQ (50 days) in the same period.
  • During the last 3 years, the average days under water is 62 days, which is larger, thus worse than the value of 57 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.