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:
  • The total return over 5 years of NASDAQ 100 Leaders Sub-strategy is 305.8%, which is greater, thus better compared to the benchmark QQQ (222.6%) in the same period.
  • Looking at total return in of 162.7% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (120.3%).

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 (26.4%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 32.4% of NASDAQ 100 Leaders Sub-strategy is higher, thus better.
  • Looking at compounded annual growth rate (CAGR) in of 37.9% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (30.1%).

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 volatility over 5 years of NASDAQ 100 Leaders Sub-strategy is 24.1%, which is higher, thus worse compared to the benchmark QQQ (22.1%) in the same period.
  • Compared with QQQ (26.1%) in the period of the last 3 years, the volatility of 28.1% is larger, 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.'

Which means for our asset as example:
  • The downside volatility over 5 years of NASDAQ 100 Leaders Sub-strategy is 16.5%, which is larger, thus worse compared to the benchmark QQQ (15.8%) in the same period.
  • Looking at downside volatility in of 19.5% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to QQQ (18.6%).

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.'

Applying this definition to our asset in some examples:
  • The risk / return profile (Sharpe) over 5 years of NASDAQ 100 Leaders Sub-strategy is 1.24, which is larger, thus better compared to the benchmark QQQ (1.08) in the same period.
  • Looking at risk / return profile (Sharpe) in of 1.26 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (1.06).

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.'

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 1.81, which is greater, thus better compared to the benchmark QQQ (1.52) in the same period.
  • Compared with QQQ (1.48) in the period of the last 3 years, the excess return divided by the downside deviation of 1.82 is larger, thus better.

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.'

Using this definition on our asset we see for example:
  • Looking at the Ulcer Index of 5.6 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 (5.55 )
  • Looking at Ulcer Ratio in of 7.03 in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to QQQ (6.8 ).

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 reduction from previous high 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.
  • During the last 3 years, the maximum reduction from previous high is -30.7 days, which is lower, thus worse than the value of -28.6 days from the benchmark.

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.'

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

Which means for our asset as 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 18 days of NASDAQ 100 Leaders Sub-strategy is smaller, thus better.
  • Compared with QQQ (34 days) in the period of the last 3 years, the average days under water of 23 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.