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.'

Which means for our asset as example:
  • Looking at the total return of 752.1% in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively higher, thus better in comparison to the benchmark QQQ (149%)
  • Compared with QQQ (34.7%) in the period of the last 3 years, the total return of 123.8% is larger, thus better.

CAGR:

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Which means for our asset as example:
  • The annual performance (CAGR) over 5 years of NASDAQ 100 Leaders Sub-strategy is 53.6%, which is higher, thus better compared to the benchmark QQQ (20%) in the same period.
  • Looking at annual performance (CAGR) in of 30.8% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (10.4%).

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:
  • The historical 30 days volatility over 5 years of NASDAQ 100 Leaders Sub-strategy is 37.1%, which is higher, thus worse compared to the benchmark QQQ (25.3%) in the same period.
  • During the last 3 years, the historical 30 days volatility is 31%, which is larger, thus worse than the value of 23.1% from the benchmark.

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 (17.9%) in the period of the last 5 years, the downside volatility of 25.1% of NASDAQ 100 Leaders Sub-strategy is greater, thus worse.
  • Looking at downside volatility in of 20.5% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to QQQ (16.1%).

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.'

Which means for our asset as example:
  • The Sharpe Ratio over 5 years of NASDAQ 100 Leaders Sub-strategy is 1.38, which is larger, thus better compared to the benchmark QQQ (0.69) in the same period.
  • Looking at risk / return profile (Sharpe) in of 0.91 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (0.34).

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.'

Which means for our asset as example:
  • The excess return divided by the downside deviation over 5 years of NASDAQ 100 Leaders Sub-strategy is 2.03, which is greater, thus better compared to the benchmark QQQ (0.98) in the same period.
  • Looking at excess return divided by the downside deviation in of 1.38 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (0.49).

Ulcer:

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Applying this definition to our asset in some examples:
  • The Downside risk index over 5 years of NASDAQ 100 Leaders Sub-strategy is 21 , which is higher, thus worse compared to the benchmark QQQ (14 ) in the same period.
  • During the last 3 years, the Downside risk index is 23 , which is higher, thus worse than the value of 17 from the benchmark.

MaxDD:

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Which means for our asset as example:
  • Looking at the maximum drop from peak to valley of -45.1 days in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively lower, thus worse in comparison to the benchmark QQQ (-35.1 days)
  • Compared with QQQ (-35.1 days) in the period of the last 3 years, the maximum reduction from previous high of -45.1 days is smaller, 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) in days.'

Applying this definition to our asset in some examples:
  • The maximum days under water over 5 years of NASDAQ 100 Leaders Sub-strategy is 507 days, which is greater, thus worse compared to the benchmark QQQ (493 days) in the same period.
  • Looking at maximum days below previous high in of 507 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to QQQ (493 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:
  • Looking at the average days below previous high of 133 days in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively larger, thus worse in comparison to the benchmark QQQ (122 days)
  • Compared with QQQ (178 days) in the period of the last 3 years, the average days below previous high of 187 days is greater, thus worse.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

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.