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 233.8% in the last 5 years of NASDAQ 100 Leaders Sub-strategy, we see it is relatively larger, thus better in comparison to the benchmark QQQ (185.7%)
  • Looking at total return, or performance in of 125.6% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (113.2%).

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.'

Applying this definition to our asset in some examples:
  • The annual return (CAGR) over 5 years of NASDAQ 100 Leaders Sub-strategy is 27.3%, which is larger, thus better compared to the benchmark QQQ (23.4%) in the same period.
  • Looking at compounded annual growth rate (CAGR) in of 31.2% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (28.7%).

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:
  • Compared with the benchmark QQQ (22.5%) in the period of the last 5 years, the historical 30 days volatility of 26.5% of NASDAQ 100 Leaders Sub-strategy is greater, thus worse.
  • Looking at 30 days standard deviation in of 31.9% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to QQQ (25%).

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.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (16.1%) in the period of the last 5 years, the downside deviation of 18.5% of NASDAQ 100 Leaders Sub-strategy is greater, thus worse.
  • During the last 3 years, the downside risk is 22.3%, which is higher, thus worse than the value of 17.8% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • The ratio of return and volatility (Sharpe) over 5 years of NASDAQ 100 Leaders Sub-strategy is 0.94, which is greater, thus better compared to the benchmark QQQ (0.93) in the same period.
  • Compared with QQQ (1.05) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 0.9 is lower, thus worse.

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:
  • Compared with the benchmark QQQ (1.29) in the period of the last 5 years, the excess return divided by the downside deviation of 1.34 of NASDAQ 100 Leaders Sub-strategy is higher, thus better.
  • Compared with QQQ (1.47) in the period of the last 3 years, the ratio of annual return and downside deviation of 1.29 is lower, thus worse.

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:
  • Compared with the benchmark QQQ (5.64 ) in the period of the last 5 years, the Downside risk index of 6.66 of NASDAQ 100 Leaders Sub-strategy is higher, thus worse.
  • Looking at Downside risk index in of 8.2 in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to QQQ (5.56 ).

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.'

Which means for our asset as example:
  • Looking at the maximum reduction from previous high of -30.7 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 (-28.6 days)
  • Compared with QQQ (-28.6 days) in the period of the last 3 years, the maximum drop from peak to valley of -30.7 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). 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'

Which means for our asset as example:
  • Looking at the maximum days below previous high of 96 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 (154 days)
  • Looking at maximum days under water in of 96 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to QQQ (72 days).

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (26 days) in the period of the last 5 years, the average time in days below previous high water mark of 20 days of NASDAQ 100 Leaders Sub-strategy is smaller, thus better.
  • Looking at average days under water in of 23 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to QQQ (18 days).

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.