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 is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (151.5%) in the period of the last 5 years, the total return, or performance of 213.9% of NASDAQ 100 Leaders Sub-strategy is larger, thus better.
  • During the last 3 years, the total return, or performance is 100.3%, which is greater, thus better than the value of 88.4% from the benchmark.

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:
  • Compared with the benchmark QQQ (20.3%) in the period of the last 5 years, the annual return (CAGR) of 25.7% of NASDAQ 100 Leaders Sub-strategy is greater, thus better.
  • During the last 3 years, the annual performance (CAGR) is 26.1%, which is greater, thus better than the value of 23.5% from the benchmark.

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.'

Which means for our asset as example:
  • The 30 days standard deviation over 5 years of NASDAQ 100 Leaders Sub-strategy is 22.4%, which is higher, thus worse compared to the benchmark QQQ (21.7%) in the same period.
  • Looking at 30 days standard deviation in of 25.1% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to QQQ (24.7%).

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 (15.5%) in the period of the last 5 years, the downside deviation of 15.5% of NASDAQ 100 Leaders Sub-strategy is higher, thus worse.
  • Looking at downside risk in of 17.5% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (17.7%).

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:
  • Compared with the benchmark QQQ (0.82) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 1.04 of NASDAQ 100 Leaders Sub-strategy is larger, thus better.
  • Looking at risk / return profile (Sharpe) in of 0.94 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (0.85).

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:
  • 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 (1.14) in the same period.
  • Looking at downside risk / excess return profile in of 1.35 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (1.19).

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.'

Using this definition on our asset we see for example:
  • The Ulcer Ratio over 5 years of NASDAQ 100 Leaders Sub-strategy is 6.61 , which is greater, thus worse compared to the benchmark QQQ (5.99 ) in the same period.
  • Compared with QQQ (6.6 ) in the period of the last 3 years, the Ulcer Index of 7.7 is greater, thus worse.

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:
  • Compared with the benchmark QQQ (-28.6 days) in the period of the last 5 years, the maximum drop from peak to valley of -33.1 days of NASDAQ 100 Leaders Sub-strategy is lower, thus worse.
  • Compared with QQQ (-28.6 days) in the period of the last 3 years, the maximum reduction from previous high of -33.1 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) in days.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (163 days) in the period of the last 5 years, the maximum days under water of 153 days of NASDAQ 100 Leaders Sub-strategy is lower, thus better.
  • During the last 3 years, the maximum time in days below previous high water mark is 100 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.'

Using this definition on our asset we see for example:
  • The average time in days below previous high water mark over 5 years of NASDAQ 100 Leaders Sub-strategy is 27 days, which is lower, thus better compared to the benchmark QQQ (36 days) in the same period.
  • Compared with QQQ (33 days) in the period of the last 3 years, the average days under water of 20 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.