The NASDAQ 100 is a sub-strategy.

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.

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Which means for our asset as example:- Looking at the total return, or performance of 213.5% in the last 5 years of NASDAQ 100 Low Volatility Sub-strategy, we see it is relatively larger, thus better in comparison to the benchmark QQQ (153.2%)
- Looking at total return in of 44.9% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (28.3%).

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark QQQ (20.5%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 25.7% of NASDAQ 100 Low Volatility Sub-strategy is higher, thus better.
- During the last 3 years, the compounded annual growth rate (CAGR) is 13.2%, which is greater, thus better than the value of 8.7% from the benchmark.

'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 historical 30 days volatility over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 21.3%, which is lower, thus better compared to the benchmark QQQ (25.5%) in the same period.
- Compared with QQQ (23.8%) in the period of the last 3 years, the 30 days standard deviation of 17.4% is smaller, thus better.

'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.'

Applying this definition to our asset in some examples:- The downside deviation over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 13.2%, which is lower, thus better compared to the benchmark QQQ (18%) in the same period.
- Looking at downside deviation in of 9.2% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to QQQ (16.7%).

'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.'

Which means for our asset as example:- Compared with the benchmark QQQ (0.7) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 1.09 of NASDAQ 100 Low Volatility Sub-strategy is larger, thus better.
- Looking at ratio of return and volatility (Sharpe) in of 0.61 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (0.26).

'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) in the period of the last 5 years, the downside risk / excess return profile of 1.76 of NASDAQ 100 Low Volatility Sub-strategy is larger, thus better.
- During the last 3 years, the ratio of annual return and downside deviation is 1.16, which is larger, thus better than the value of 0.37 from the benchmark.

'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.'

Applying this definition to our asset in some examples:- Looking at the Downside risk index of 5.96 in the last 5 years of NASDAQ 100 Low Volatility Sub-strategy, we see it is relatively smaller, thus better in comparison to the benchmark QQQ (14 )
- Looking at Ulcer Ratio in of 6.02 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (17 ).

'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:- The maximum reduction from previous high over 5 years of NASDAQ 100 Low Volatility Sub-strategy is -29.3 days, which is higher, thus better compared to the benchmark QQQ (-35.1 days) in the same period.
- During the last 3 years, the maximum reduction from previous high is -13.6 days, which is larger, thus better than the value of -35.1 days from the benchmark.

'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:- Looking at the maximum days under water of 273 days in the last 5 years of NASDAQ 100 Low Volatility Sub-strategy, we see it is relatively lower, thus better in comparison to the benchmark QQQ (493 days)
- Looking at maximum days under water in of 273 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (493 days).

'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.'

Using this definition on our asset we see for example:- Looking at the average time in days below previous high water mark of 51 days in the last 5 years of NASDAQ 100 Low Volatility Sub-strategy, we see it is relatively lower, thus better in comparison to the benchmark QQQ (123 days)
- During the last 3 years, the average time in days below previous high water mark is 71 days, which is lower, thus better than the value of 179 days from the benchmark.

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of NASDAQ 100 Low Volatility Sub-strategy are hypothetical and do not account for slippage, fees or taxes.
- Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.