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 276.7% 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 (227.6%)
  • Looking at total return in of 131.5% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (118.9%).

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:
  • Looking at the annual return (CAGR) of 30.4% 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 (26.8%)
  • During the last 3 years, the annual return (CAGR) is 32.3%, which is greater, thus better than the value of 29.9% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Looking at the historical 30 days volatility of 23% 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 (22.2%)
  • During the last 3 years, the historical 30 days volatility is 27.4%, which is greater, thus worse than the value of 26% 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:
  • Compared with the benchmark QQQ (15.8%) in the period of the last 5 years, the downside volatility of 16.1% of NASDAQ 100 Balanced Unhedged Sub-strategy is greater, thus worse.
  • Looking at downside risk in of 19.4% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to QQQ (18.5%).

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 Sharpe Ratio over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 1.22, which is higher, thus better compared to the benchmark QQQ (1.1) in the same period.
  • Looking at Sharpe Ratio in of 1.09 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (1.05).

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (1.54) in the period of the last 5 years, the excess return divided by the downside deviation of 1.74 of NASDAQ 100 Balanced Unhedged Sub-strategy is higher, thus better.
  • Looking at excess return divided by the downside deviation in of 1.54 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (1.48).

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:
  • The Downside risk index over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 5.17 , which is lower, thus better compared to the benchmark QQQ (5.56 ) in the same period.
  • Compared with QQQ (6.03 ) in the period of the last 3 years, the Ulcer Ratio of 6.24 is larger, thus worse.

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.'

Which means for our asset as example:
  • The maximum drop from peak to valley over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is -30.8 days, which is lower, thus worse compared to the benchmark QQQ (-28.6 days) in the same period.
  • Looking at maximum DrawDown 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.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (154 days) in the period of the last 5 years, the maximum days below previous high of 131 days of NASDAQ 100 Balanced Unhedged Sub-strategy is lower, thus better.
  • Looking at maximum days below previous high in of 94 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to QQQ (98 days).

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.'

Which means for our asset as example:
  • The average days below previous high over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 26 days, which is higher, thus worse compared to the benchmark QQQ (26 days) in the same period.
  • During the last 3 years, the average days under water is 24 days, which is higher, thus worse than the value of 24 days from the benchmark.

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.