Description

The NASDAQ 100 is a sub-strategy.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (122.6%) in the period of the last 5 years, the total return of 149.3% of NASDAQ 100 Low Volatility Strategy is larger, thus better.
  • Looking at total return, or increase in value in of 90.7% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (82%).

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 compounded annual growth rate (CAGR) over 5 years of NASDAQ 100 Low Volatility Strategy is 20.1%, which is higher, thus better compared to the benchmark QQQ (17.4%) in the same period.
  • Compared with QQQ (22.1%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 24% is greater, thus better.

Volatility:

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Which means for our asset as example:
  • Looking at the volatility of 13.6% in the last 5 years of NASDAQ 100 Low Volatility Strategy, we see it is relatively lower, thus better in comparison to the benchmark QQQ (17.1%)
  • Looking at volatility in of 13% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (17.5%).

DownVol:

'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 (12.2%) in the period of the last 5 years, the downside volatility of 9.6% of NASDAQ 100 Low Volatility Strategy is lower, thus better.
  • During the last 3 years, the downside deviation is 9.1%, which is smaller, thus better than the value of 12.5% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Looking at the ratio of return and volatility (Sharpe) of 1.29 in the last 5 years of NASDAQ 100 Low Volatility Strategy, we see it is relatively higher, thus better in comparison to the benchmark QQQ (0.87)
  • Looking at risk / return profile (Sharpe) in of 1.66 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (1.12).

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.'

Applying this definition to our asset in some examples:
  • Looking at the ratio of annual return and downside deviation of 1.84 in the last 5 years of NASDAQ 100 Low Volatility Strategy, we see it is relatively higher, thus better in comparison to the benchmark QQQ (1.22)
  • Looking at downside risk / excess return profile in of 2.36 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (1.57).

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 (4.98 ) in the period of the last 5 years, the Ulcer Ratio of 4.16 of NASDAQ 100 Low Volatility Strategy is lower, thus better.
  • During the last 3 years, the Downside risk index is 4.27 , which is smaller, thus better than the value of 4.97 from the benchmark.

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 DrawDown over 5 years of NASDAQ 100 Low Volatility Strategy is -19.4 days, which is larger, thus better compared to the benchmark QQQ (-22.8 days) in the same period.
  • Looking at maximum reduction from previous high in of -19.4 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (-22.8 days).

MaxDuration:

'The Maximum 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. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Which means for our asset as example:
  • Looking at the maximum days under water of 175 days in the last 5 years of NASDAQ 100 Low Volatility Strategy, we see it is relatively larger, thus worse in comparison to the benchmark QQQ (163 days)
  • Compared with QQQ (154 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 155 days is larger, thus worse.

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:
  • Compared with the benchmark QQQ (35 days) in the period of the last 5 years, the average days below previous high of 39 days of NASDAQ 100 Low Volatility Strategy is larger, thus worse.
  • During the last 3 years, the average days under water is 30 days, which is larger, thus worse than the value of 30 days from the benchmark.

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 Low Volatility 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.