Description

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 (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:
  • Looking at the total return of 236.1% in the last 5 years of NASDAQ 100 Leaders Strategy, we see it is relatively larger, thus better in comparison to the benchmark QQQ (130%)
  • During the last 3 years, the total return, or performance is 139.6%, which is higher, thus better than the value of 88% 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 (18.1%) in the period of the last 5 years, the annual performance (CAGR) of 27.5% of NASDAQ 100 Leaders Strategy is larger, thus better.
  • Compared with QQQ (23.4%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 33.8% is higher, thus better.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (17.1%) in the period of the last 5 years, the volatility of 17.1% of NASDAQ 100 Leaders Strategy is higher, thus worse.
  • Looking at volatility in of 16.2% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (17.4%).

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 (12.2%) in the period of the last 5 years, the downside deviation of 11.4% of NASDAQ 100 Leaders Strategy is lower, thus better.
  • Compared with QQQ (12.4%) in the period of the last 3 years, the downside risk of 10.8% is smaller, thus better.

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.'

Applying this definition to our asset in some examples:
  • The risk / return profile (Sharpe) over 5 years of NASDAQ 100 Leaders Strategy is 1.46, which is greater, thus better compared to the benchmark QQQ (0.91) in the same period.
  • Looking at risk / return profile (Sharpe) in of 1.94 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (1.2).

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.'

Applying this definition to our asset in some examples:
  • The excess return divided by the downside deviation over 5 years of NASDAQ 100 Leaders Strategy is 2.18, which is greater, thus better compared to the benchmark QQQ (1.29) in the same period.
  • Looking at downside risk / excess return profile in of 2.91 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (1.69).

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.'

Which means for our asset as example:
  • The Ulcer Index over 5 years of NASDAQ 100 Leaders Strategy is 3.77 , which is smaller, thus better compared to the benchmark QQQ (4.98 ) in the same period.
  • Compared with QQQ (4.97 ) in the period of the last 3 years, the Ulcer Ratio of 3.02 is lower, thus better.

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 DrawDown of -15.3 days in the last 5 years of NASDAQ 100 Leaders Strategy, we see it is relatively higher, thus better in comparison to the benchmark QQQ (-22.8 days)
  • During the last 3 years, the maximum reduction from previous high is -15.1 days, which is higher, thus better than the value of -22.8 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 (163 days) in the period of the last 5 years, the maximum days below previous high of 153 days of NASDAQ 100 Leaders Strategy is lower, thus better.
  • Compared with QQQ (154 days) in the period of the last 3 years, the maximum days under water of 67 days is lower, thus better.

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 under water over 5 years of NASDAQ 100 Leaders Strategy is 26 days, which is smaller, thus better compared to the benchmark QQQ (35 days) in the same period.
  • Looking at average days below previous high in of 13 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to QQQ (30 days).

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 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.