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 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:
  • The total return over 5 years of NASDAQ 100 Leaders Strategy is 569.5%, which is higher, thus better compared to the benchmark QQQ (103.1%) in the same period.
  • During the last 3 years, the total return is 227.3%, which is greater, thus better than the value of 68.2% 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.'

Which means for our asset as example:
  • Looking at the annual performance (CAGR) of 46.3% in the last 5 years of NASDAQ 100 Leaders Strategy, we see it is relatively greater, thus better in comparison to the benchmark QQQ (15.2%)
  • Looking at compounded annual growth rate (CAGR) in of 48.5% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (19%).

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 29.7% in the last 5 years of NASDAQ 100 Leaders Strategy, we see it is relatively larger, thus worse in comparison to the benchmark QQQ (17.3%)
  • Looking at 30 days standard deviation in of 30.9% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to QQQ (17.2%).

DownVol:

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

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (19.3%) in the period of the last 5 years, the downside risk of 32% of NASDAQ 100 Leaders Strategy is greater, thus worse.
  • Compared with QQQ (19.6%) in the period of the last 3 years, the downside volatility of 33.6% is greater, 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.'

Using this definition on our asset we see for example:
  • Looking at the risk / return profile (Sharpe) of 1.48 in the last 5 years of NASDAQ 100 Leaders Strategy, we see it is relatively greater, thus better in comparison to the benchmark QQQ (0.73)
  • Looking at Sharpe Ratio in of 1.49 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (0.95).

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.'

Using this definition on our asset we see for example:
  • Looking at the ratio of annual return and downside deviation of 1.37 in the last 5 years of NASDAQ 100 Leaders Strategy, we see it is relatively greater, thus better in comparison to the benchmark QQQ (0.66)
  • Compared with QQQ (0.84) in the period of the last 3 years, the ratio of annual return and downside deviation of 1.37 is higher, thus better.

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:
  • Compared with the benchmark QQQ (5.02 ) in the period of the last 5 years, the Ulcer Index of 9.02 of NASDAQ 100 Leaders Strategy is larger, thus worse.
  • Compared with QQQ (4.97 ) in the period of the last 3 years, the Downside risk index of 10 is higher, 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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (-22.8 days) in the period of the last 5 years, the maximum DrawDown of -35.8 days of NASDAQ 100 Leaders Strategy is smaller, thus worse.
  • Looking at maximum drop from peak to valley in of -35.8 days in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to QQQ (-22.8 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'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (163 days) in the period of the last 5 years, the maximum days under water of 244 days of NASDAQ 100 Leaders Strategy is higher, thus worse.
  • Compared with QQQ (154 days) in the period of the last 3 years, the maximum days below previous high of 244 days is higher, thus worse.

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:
  • Looking at the average days under water of 43 days in the last 5 years of NASDAQ 100 Leaders Strategy, we see it is relatively higher, thus worse in comparison to the benchmark QQQ (34 days)
  • Compared with QQQ (29 days) in the period of the last 3 years, the average time in days below previous high water mark of 57 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 (%)

  • "Year" returns in the table above are not equal to 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.