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:
  • The total return, or performance over 5 years of NASDAQ 100 Leaders Sub-strategy is 334.5%, which is larger, thus better compared to the benchmark QQQ (231.4%) in the same period.
  • Compared with QQQ (110.6%) in the period of the last 3 years, the total return of 169.7% 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.'

Which means for our asset as example:
  • Looking at the annual return (CAGR) of 34.2% 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 (27.1%)
  • Compared with QQQ (28.2%) in the period of the last 3 years, the annual performance (CAGR) of 39.3% 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.'

Applying this definition to our asset in some examples:
  • The 30 days standard deviation over 5 years of NASDAQ 100 Leaders Sub-strategy is 24.2%, which is larger, thus worse compared to the benchmark QQQ (22.1%) in the same period.
  • Looking at 30 days standard deviation in of 28.4% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to QQQ (26.1%).

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:
  • The downside deviation over 5 years of NASDAQ 100 Leaders Sub-strategy is 16.5%, which is larger, thus worse compared to the benchmark QQQ (15.7%) in the same period.
  • Compared with QQQ (18.6%) in the period of the last 3 years, the downside risk of 19.6% 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.'

Using this definition on our asset we see for example:
  • The risk / return profile (Sharpe) over 5 years of NASDAQ 100 Leaders Sub-strategy is 1.31, which is higher, thus better compared to the benchmark QQQ (1.11) in the same period.
  • Looking at ratio of return and volatility (Sharpe) in of 1.29 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (0.98).

Sortino:

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (1.57) in the period of the last 5 years, the downside risk / excess return profile of 1.92 of NASDAQ 100 Leaders Sub-strategy is greater, thus better.
  • During the last 3 years, the ratio of annual return and downside deviation is 1.87, which is greater, thus better than the value of 1.38 from the benchmark.

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:
  • Looking at the Downside risk index of 5.64 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 (5.53 )
  • Looking at Ulcer Index in of 7.08 in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to QQQ (6.82 ).

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:
  • Compared with the benchmark QQQ (-28.6 days) in the period of the last 5 years, the maximum reduction from previous high of -30.7 days of NASDAQ 100 Leaders Sub-strategy is smaller, thus worse.
  • Looking at maximum DrawDown in of -30.7 days in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to QQQ (-28.6 days).

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 below previous high over 5 years of NASDAQ 100 Leaders Sub-strategy is 96 days, which is lower, thus better compared to the benchmark QQQ (154 days) in the same period.
  • 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 Average 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. 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 time in days below previous high water mark of 19 days in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively lower, thus better in comparison to the benchmark QQQ (26 days)
  • Compared with QQQ (35 days) in the period of the last 3 years, the average days below previous high of 24 days is lower, thus better.

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.