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:

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Applying this definition to our asset in some examples:
  • The total return, or performance over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 207%, which is greater, thus better compared to the benchmark QQQ (181.8%) in the same period.
  • During the last 3 years, the total return is 98.6%, which is greater, thus better than the value of 96.6% 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.'

Applying this definition to our asset in some examples:
  • The compounded annual growth rate (CAGR) over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 25.1%, which is greater, thus better compared to the benchmark QQQ (23%) in the same period.
  • Looking at annual performance (CAGR) in of 25.7% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (25.3%).

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.'

Using this definition on our asset we see for example:
  • The volatility over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 20.5%, which is smaller, thus better compared to the benchmark QQQ (21.8%) in the same period.
  • Compared with QQQ (25.5%) in the period of the last 3 years, the volatility of 23.8% is lower, thus better.

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.'

Which means for our asset as example:
  • Looking at the downside deviation of 14.6% 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 (15.6%)
  • During the last 3 years, the downside volatility is 17.3%, which is lower, thus better than the value of 18.4% 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:
  • Compared with the benchmark QQQ (0.94) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.11 of NASDAQ 100 Balanced Unhedged Sub-strategy is larger, thus better.
  • Compared with QQQ (0.89) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.98 is greater, thus better.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (1.31) in the period of the last 5 years, the excess return divided by the downside deviation of 1.55 of NASDAQ 100 Balanced Unhedged Sub-strategy is greater, thus better.
  • During the last 3 years, the downside risk / excess return profile is 1.34, which is greater, thus better than the value of 1.24 from the benchmark.

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:
  • Looking at the Ulcer Ratio of 5.05 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 (5.89 )
  • During the last 3 years, the Ulcer Index is 5.79 , which is lower, thus better than the value of 6.76 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.'

Applying this definition to our asset in some examples:
  • Looking at the maximum drop from peak to valley of -30.8 days in the last 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy, we see it is relatively lower, thus worse in comparison to the benchmark QQQ (-28.6 days)
  • During the last 3 years, the maximum reduction from previous high is -30.8 days, which is lower, thus worse than the value of -28.6 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.'

Using this definition on our asset we see for 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 smaller, thus better in comparison to the benchmark QQQ (163 days)
  • Compared with QQQ (154 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 94 days is lower, thus better.

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:
  • The average time in days below previous high water mark over 5 years of NASDAQ 100 Balanced Unhedged Sub-strategy is 26 days, which is lower, thus better compared to the benchmark QQQ (35 days) in the same period.
  • During the last 3 years, the average time in days below previous high water mark is 18 days, which is smaller, thus better than the value of 33 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.