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:

'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.'

Using this definition on our asset we see for example:
  • Looking at the total return of 184.9% in the last 5 years of NASDAQ 100 Low Volatility Sub-strategy, we see it is relatively lower, thus worse in comparison to the benchmark QQQ (231.4%)
  • During the last 3 years, the total return, or increase in value is 78.9%, which is lower, thus worse than the value of 110.6% 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.'

Which means for our asset as example:
  • Looking at the compounded annual growth rate (CAGR) of 23.3% in the last 5 years of NASDAQ 100 Low Volatility Sub-strategy, we see it is relatively smaller, thus worse in comparison to the benchmark QQQ (27.1%)
  • During the last 3 years, the annual performance (CAGR) is 21.4%, which is lower, thus worse than the value of 28.2% from the benchmark.

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:
  • Compared with the benchmark QQQ (22.1%) in the period of the last 5 years, the volatility of 17.9% of NASDAQ 100 Low Volatility Sub-strategy is lower, thus better.
  • During the last 3 years, the historical 30 days volatility is 21.3%, which is smaller, thus better than the value of 26.1% from the benchmark.

DownVol:

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (15.7%) in the period of the last 5 years, the downside risk of 12.7% of NASDAQ 100 Low Volatility Sub-strategy is lower, thus better.
  • During the last 3 years, the downside risk is 15.1%, which is lower, thus better than the value of 18.6% 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.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (1.11) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 1.16 of NASDAQ 100 Low Volatility Sub-strategy is greater, thus better.
  • During the last 3 years, the risk / return profile (Sharpe) is 0.89, which is lower, thus worse than the value of 0.98 from the benchmark.

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:
  • Compared with the benchmark QQQ (1.57) in the period of the last 5 years, the excess return divided by the downside deviation of 1.65 of NASDAQ 100 Low Volatility Sub-strategy is greater, thus better.
  • Looking at ratio of annual return and downside deviation in of 1.25 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to QQQ (1.38).

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.'

Applying this definition to our asset in some examples:
  • The Ulcer Index over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 5.32 , which is lower, thus better compared to the benchmark QQQ (5.53 ) in the same period.
  • During the last 3 years, the Ulcer Ratio is 6.54 , which is lower, thus better than the value of 6.82 from the benchmark.

MaxDD:

'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:
  • Compared with the benchmark QQQ (-28.6 days) in the period of the last 5 years, the maximum DrawDown of -28.5 days of NASDAQ 100 Low Volatility Sub-strategy is greater, thus better.
  • During the last 3 years, the maximum reduction from previous high is -28.5 days, which is larger, thus better than the value of -28.6 days from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (154 days) in the period of the last 5 years, the maximum days under water of 198 days of NASDAQ 100 Low Volatility Sub-strategy is higher, thus worse.
  • Compared with QQQ (154 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 198 days is higher, 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 (26 days) in the period of the last 5 years, the average days below previous high of 39 days of NASDAQ 100 Low Volatility Sub-strategy is larger, thus worse.
  • During the last 3 years, the average days below previous high is 50 days, which is higher, thus worse than the value of 35 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 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.