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, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Applying this definition to our asset in some examples:
  • The total return over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 1336.1%, which is larger, thus better compared to the benchmark QQQ (155.3%) in the same period.
  • Compared with QQQ (41.9%) in the period of the last 3 years, the total return of 171.2% 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 return (CAGR) of 70.5% in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively higher, thus better in comparison to the benchmark QQQ (20.6%)
  • During the last 3 years, the annual performance (CAGR) is 39.5%, which is larger, thus better than the value of 12.4% from the benchmark.

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:
  • Looking at the 30 days standard deviation of 30.9% in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively higher, thus worse in comparison to the benchmark QQQ (25.3%)
  • Compared with QQQ (23.1%) in the period of the last 3 years, the volatility of 26.6% is higher, thus worse.

DownVol:

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (17.9%) in the period of the last 5 years, the downside volatility of 19.7% of NASDAQ 100 Balanced Unhedged Sub-strategy is larger, thus worse.
  • Compared with QQQ (16.1%) in the period of the last 3 years, the downside deviation of 17% is higher, thus worse.

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.'

Which means for our asset as example:
  • The Sharpe Ratio over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 2.2, which is larger, thus better compared to the benchmark QQQ (0.72) in the same period.
  • During the last 3 years, the risk / return profile (Sharpe) is 1.39, which is greater, thus better than the value of 0.43 from the benchmark.

Sortino:

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (1.01) in the period of the last 5 years, the ratio of annual return and downside deviation of 3.45 of NASDAQ 100 Balanced Unhedged Sub-strategy is larger, thus better.
  • During the last 3 years, the downside risk / excess return profile is 2.18, which is higher, thus better than the value of 0.61 from the benchmark.

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.'

Using this definition on our asset we see for example:
  • The Ulcer Ratio over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 7.29 , which is smaller, thus better compared to the benchmark QQQ (14 ) in the same period.
  • During the last 3 years, the Downside risk index is 7.39 , which is lower, thus better than the value of 17 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 DrawDown 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)
  • Looking at maximum drop from peak to valley in of -18.1 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (-35.1 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). 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'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (493 days) in the period of the last 5 years, the maximum days under water of 299 days of NASDAQ 100 Balanced Unhedged Sub-strategy is lower, thus better.
  • Looking at maximum days under water in of 299 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (493 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.'

Which means for our asset as example:
  • The average days below previous high over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 56 days, which is lower, thus better compared to the benchmark QQQ (122 days) in the same period.
  • Looking at average days below previous high in of 79 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (180 days).

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 and do not account for slippage, fees or taxes.
  • Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.