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:
  • The total return over 5 years of NASDAQ 100 Leaders Strategy is 677.7%, which is greater, thus better compared to the benchmark QQQ (110.5%) in the same period.
  • Compared with QQQ (76.6%) in the period of the last 3 years, the total return, or increase in value of 306.8% is larger, thus better.

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 (16.1%) in the period of the last 5 years, the annual return (CAGR) of 50.8% of NASDAQ 100 Leaders Strategy is greater, thus better.
  • Compared with QQQ (20.9%) in the period of the last 3 years, the annual return (CAGR) of 59.7% is larger, thus better.

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 historical 30 days volatility over 5 years of NASDAQ 100 Leaders Strategy is 28.9%, which is higher, thus worse compared to the benchmark QQQ (17%) in the same period.
  • Compared with QQQ (16.7%) in the period of the last 3 years, the historical 30 days volatility of 30% is greater, 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:
  • Compared with the benchmark QQQ (19.1%) in the period of the last 5 years, the downside deviation of 31.3% of NASDAQ 100 Leaders Strategy is greater, thus worse.
  • Looking at downside deviation in of 33% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to QQQ (19.2%).

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 (0.8) in the period of the last 5 years, the Sharpe Ratio of 1.67 of NASDAQ 100 Leaders Strategy is higher, thus better.
  • During the last 3 years, the ratio of return and volatility (Sharpe) is 1.91, which is greater, thus better than the value of 1.1 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:
  • Looking at the excess return divided by the downside deviation of 1.54 in the last 5 years of NASDAQ 100 Leaders Strategy, we see it is relatively larger, thus better in comparison to the benchmark QQQ (0.71)
  • During the last 3 years, the downside risk / excess return profile is 1.73, which is greater, thus better than the value of 0.96 from the benchmark.

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:
  • Looking at the Ulcer Index of 8.84 in the last 5 years of NASDAQ 100 Leaders Strategy, we see it is relatively higher, thus worse in comparison to the benchmark QQQ (4.98 )
  • During the last 3 years, the Ulcer Index is 9.98 , which is larger, thus worse than the value of 4.89 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.'

Applying this definition to our asset in some examples:
  • The maximum reduction from previous high over 5 years of NASDAQ 100 Leaders Strategy is -35.8 days, which is smaller, thus worse compared to the benchmark QQQ (-22.8 days) in the same period.
  • 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 lower, 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). 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 below previous high of 200 days of NASDAQ 100 Leaders Strategy is larger, thus worse.
  • Looking at maximum days under water in of 200 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to QQQ (154 days).

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 (34 days) in the period of the last 5 years, the average time in days below previous high water mark of 34 days of NASDAQ 100 Leaders Strategy is greater, thus worse.
  • Looking at average time in days below previous high water mark in of 42 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to QQQ (28 days).

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.