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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (112.9%) in the period of the last 5 years, the total return of 632.9% of NASDAQ 100 Leaders Strategy is larger, thus better.
  • During the last 3 years, the total return, or performance is 311.3%, which is larger, thus better than the value of 74.8% 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:
  • Compared with the benchmark QQQ (16.3%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 49% of NASDAQ 100 Leaders Strategy is greater, thus better.
  • Looking at annual return (CAGR) in of 60.2% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (20.5%).

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.'

Using this definition on our asset we see for example:
  • Looking at the 30 days standard deviation of 29.3% in the last 5 years of NASDAQ 100 Leaders Strategy, we see it is relatively larger, thus worse in comparison to the benchmark QQQ (16.9%)
  • Compared with QQQ (16.7%) in the period of the last 3 years, the historical 30 days volatility of 29.6% 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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (19%) in the period of the last 5 years, the downside deviation of 31.8% of NASDAQ 100 Leaders Strategy is larger, thus worse.
  • Compared with QQQ (19%) in the period of the last 3 years, the downside deviation of 32.4% is greater, thus worse.

Sharpe:

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Applying this definition to our asset in some examples:
  • The ratio of return and volatility (Sharpe) over 5 years of NASDAQ 100 Leaders Strategy is 1.59, which is higher, thus better compared to the benchmark QQQ (0.82) in the same period.
  • During the last 3 years, the Sharpe Ratio is 1.95, which is larger, thus better than the value of 1.08 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.'

Using this definition on our asset we see for example:
  • The ratio of annual return and downside deviation over 5 years of NASDAQ 100 Leaders Strategy is 1.46, which is higher, thus better compared to the benchmark QQQ (0.73) in the same period.
  • Looking at ratio of annual return and downside deviation in of 1.78 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (0.94).

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.'

Applying this definition to our asset in some examples:
  • Looking at the Downside risk index of 8.84 in the last 5 years of NASDAQ 100 Leaders Strategy, we see it is relatively higher, thus better in comparison to the benchmark QQQ (4.93 )
  • Looking at Downside risk index in of 9.71 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (4.83 ).

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.'

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

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (163 days) in the period of the last 5 years, the maximum days below previous high of 119 days of NASDAQ 100 Leaders Strategy is smaller, thus better.
  • Compared with QQQ (139 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 119 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:
  • Compared with the benchmark QQQ (32 days) in the period of the last 5 years, the average days under water of 24 days of NASDAQ 100 Leaders Strategy is lower, thus better.
  • During the last 3 years, the average days under water is 24 days, which is smaller, thus better than the value of 26 days from the benchmark.

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.