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, 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (181.8%) in the period of the last 5 years, the total return of 220.1% of NASDAQ 100 Leaders Sub-strategy is greater, thus better.
  • Compared with QQQ (96.6%) in the period of the last 3 years, the total return of 113.3% is greater, thus better.

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.'

Using this definition on our asset we see for example:
  • Looking at the compounded annual growth rate (CAGR) of 26.2% in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively greater, thus better in comparison to the benchmark QQQ (23%)
  • During the last 3 years, the compounded annual growth rate (CAGR) is 28.8%, which is higher, thus better than the value of 25.3% from the benchmark.

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 30 days standard deviation over 5 years of NASDAQ 100 Leaders Sub-strategy is 22.5%, which is higher, thus worse compared to the benchmark QQQ (21.8%) in the same period.
  • Compared with QQQ (25.5%) in the period of the last 3 years, the historical 30 days volatility of 25.9% is greater, 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 (15.6%) in the period of the last 5 years, the downside volatility of 15.8% of NASDAQ 100 Leaders Sub-strategy is larger, thus worse.
  • Compared with QQQ (18.4%) in the period of the last 3 years, the downside risk of 18.5% is higher, 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.'

Which means for our asset as example:
  • Looking at the ratio of return and volatility (Sharpe) of 1.05 in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively greater, thus better in comparison to the benchmark QQQ (0.94)
  • Compared with QQQ (0.89) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 1.01 is greater, thus better.

Sortino:

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Applying this definition to our asset in some examples:
  • The downside risk / excess return profile over 5 years of NASDAQ 100 Leaders Sub-strategy is 1.5, which is larger, thus better compared to the benchmark QQQ (1.31) in the same period.
  • Compared with QQQ (1.24) in the period of the last 3 years, the excess return divided by the downside deviation of 1.42 is larger, 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.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (5.89 ) in the period of the last 5 years, the Ulcer Ratio of 5.86 of NASDAQ 100 Leaders Sub-strategy is lower, thus better.
  • Compared with QQQ (6.76 ) in the period of the last 3 years, the Ulcer Ratio of 6.74 is smaller, thus better.

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:
  • The maximum DrawDown over 5 years of NASDAQ 100 Leaders Sub-strategy is -30.7 days, which is lower, thus worse compared to the benchmark QQQ (-28.6 days) in the same period.
  • Compared with QQQ (-28.6 days) in the period of the last 3 years, the maximum reduction from previous high of -30.7 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.'

Which means for our asset as example:
  • Looking at the maximum days under water of 153 days in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively smaller, thus better in comparison to the benchmark QQQ (163 days)
  • During the last 3 years, the maximum days under water is 96 days, which is lower, thus better than the value of 154 days from the benchmark.

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 25 days in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively smaller, thus better in comparison to the benchmark QQQ (35 days)
  • Looking at average days below previous high in of 19 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to QQQ (33 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 Sub-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.