Description of NASDAQ 100 Leaders Strategy

The NASDAQ 100 leaders 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 of NASDAQ 100 Leaders Strategy (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.'

Which means for our asset as example:
  • Looking at the total return, or increase in value of 472.8% in the last 5 years of NASDAQ 100 Leaders Strategy, we see it is relatively larger, thus better in comparison to the benchmark QQQ (107.1%)
  • During the last 3 years, the total return, or performance is 125.4%, which is higher, thus better than the value of 77.1% 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (15.7%) in the period of the last 5 years, the annual return (CAGR) of 41.8% of NASDAQ 100 Leaders Strategy is greater, thus better.
  • During the last 3 years, the compounded annual growth rate (CAGR) is 31.2%, which is greater, thus better than the value of 21% from the benchmark.

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:
  • Compared with the benchmark QQQ (17.2%) in the period of the last 5 years, the historical 30 days volatility of 28.9% of NASDAQ 100 Leaders Strategy is greater, thus worse.
  • Compared with QQQ (17.3%) in the period of the last 3 years, the historical 30 days volatility of 29.1% is larger, thus worse.

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.'

Using this definition on our asset we see for example:
  • Looking at the downside volatility of 31.2% in the last 5 years of NASDAQ 100 Leaders Strategy, we see it is relatively larger, thus worse in comparison to the benchmark QQQ (19.3%)
  • Compared with QQQ (20%) in the period of the last 3 years, the downside volatility of 32.7% is higher, thus worse.

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:
  • Compared with the benchmark QQQ (0.77) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.36 of NASDAQ 100 Leaders Strategy is larger, thus better.
  • During the last 3 years, the Sharpe Ratio is 0.99, which is smaller, thus worse than the value of 1.07 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 excess return divided by the downside deviation over 5 years of NASDAQ 100 Leaders Strategy is 1.26, which is higher, thus better compared to the benchmark QQQ (0.68) in the same period.
  • Compared with QQQ (0.93) in the period of the last 3 years, the ratio of annual return and downside deviation of 0.88 is lower, thus worse.

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.'

Using this definition on our asset we see for example:
  • The Downside risk index over 5 years of NASDAQ 100 Leaders Strategy is 9.46 , which is larger, thus worse compared to the benchmark QQQ (5.01 ) in the same period.
  • During the last 3 years, the Ulcer Index is 11 , which is larger, thus worse than the value of 4.97 from the benchmark.

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:
  • Compared with the benchmark QQQ (-22.8 days) in the period of the last 5 years, the maximum drop from peak to valley of -35.8 days of NASDAQ 100 Leaders Strategy is lower, thus worse.
  • Compared with QQQ (-22.8 days) in the period of the last 3 years, the maximum reduction from previous high of -35.8 days is smaller, thus worse.

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 (163 days) in the period of the last 5 years, the maximum days under water of 287 days of NASDAQ 100 Leaders Strategy is larger, thus worse.
  • Compared with QQQ (154 days) in the period of the last 3 years, the maximum days under water of 287 days is greater, thus worse.

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 Leaders Strategy is 56 days, which is higher, thus worse compared to the benchmark QQQ (35 days) in the same period.
  • Compared with QQQ (30 days) in the period of the last 3 years, the average time in days below previous high water mark of 77 days is larger, thus worse.

Performance of NASDAQ 100 Leaders Strategy (YTD)

Historical returns have been extended using synthetic data.

Allocations of NASDAQ 100 Leaders Strategy
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Allocations

Returns of NASDAQ 100 Leaders Strategy (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of NASDAQ 100 Leaders 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.