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:
  • Compared with the benchmark QQQ (222.6%) in the period of the last 5 years, the total return, or increase in value of 285.7% of NASDAQ 100 Balanced Unhedged Sub-strategy is greater, thus better.
  • During the last 3 years, the total return is 151%, which is greater, thus better than the value of 120.3% from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (26.4%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 31% of NASDAQ 100 Balanced Unhedged Sub-strategy is greater, thus better.
  • Looking at annual performance (CAGR) in of 35.8% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (30.1%).

Volatility:

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Which means for our asset as example:
  • Looking at the 30 days standard deviation of 22.2% 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 (22.1%)
  • Compared with QQQ (26.1%) in the period of the last 3 years, the volatility of 26.3% is larger, thus worse.

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.'

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 risk of 15.6% of NASDAQ 100 Balanced Unhedged Sub-strategy is lower, thus better.
  • During the last 3 years, the downside risk is 18.5%, which is lower, thus better than the value of 18.6% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Looking at the ratio of return and volatility (Sharpe) of 1.28 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 (1.08)
  • During the last 3 years, the Sharpe Ratio is 1.27, which is higher, thus better than the value of 1.06 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 1.83, which is greater, thus better compared to the benchmark QQQ (1.52) in the same period.
  • Compared with QQQ (1.48) in the period of the last 3 years, the downside risk / excess return profile of 1.8 is greater, thus better.

Ulcer:

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (5.55 ) in the period of the last 5 years, the Ulcer Ratio of 5 of NASDAQ 100 Balanced Unhedged Sub-strategy is smaller, thus better.
  • Compared with QQQ (6.8 ) in the period of the last 3 years, the Ulcer Index of 6.06 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.'

Which means for our asset as example:
  • The maximum DrawDown over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is -30.8 days, which is smaller, thus worse compared to the benchmark QQQ (-28.6 days) in the same period.
  • During the last 3 years, the maximum DrawDown is -30.8 days, which is smaller, thus worse than the value of -28.6 days from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • 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 under water in of 94 days in the period of the last 3 years, we see it is relatively smaller, 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.'

Applying this definition to our asset in some examples:
  • Looking at the average days under water of 25 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 (26 days)
  • Compared with QQQ (34 days) in the period of the last 3 years, the average days below previous high of 23 days is smaller, thus better.

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.