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:
  • The total return, or increase in value over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 238.1%, which is greater, thus better compared to the benchmark QQQ (181.8%) in the same period.
  • Looking at total return, or performance in of 129% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to QQQ (96.6%).

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 annual performance (CAGR) over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 27.6%, which is greater, thus better compared to the benchmark QQQ (23%) in the same period.
  • Compared with QQQ (25.3%) in the period of the last 3 years, the annual performance (CAGR) of 31.9% is greater, thus better.

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:
  • Compared with the benchmark QQQ (21.8%) in the period of the last 5 years, the 30 days standard deviation of 18% of NASDAQ 100 Low Volatility Sub-strategy is lower, thus better.
  • During the last 3 years, the 30 days standard deviation is 20.8%, which is lower, thus better than the value of 25.5% from the benchmark.

DownVol:

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

Applying this definition to our asset in some examples:
  • The downside deviation over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 12.6%, which is lower, thus better compared to the benchmark QQQ (15.6%) in the same period.
  • Looking at downside risk in of 14.7% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to QQQ (18.4%).

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark QQQ (0.94) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.39 of NASDAQ 100 Low Volatility Sub-strategy is larger, thus better.
  • Looking at risk / return profile (Sharpe) in of 1.41 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (0.89).

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.'

Using this definition on our asset we see for example:
  • The downside risk / excess return profile over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 1.99, which is higher, thus better compared to the benchmark QQQ (1.31) in the same period.
  • Looking at ratio of annual return and downside deviation in of 2 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (1.24).

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:
  • The Ulcer Ratio over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 4.61 , which is lower, thus better compared to the benchmark QQQ (5.89 ) in the same period.
  • Looking at Downside risk index in of 5.37 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to QQQ (6.76 ).

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:
  • The maximum reduction from previous high over 5 years of NASDAQ 100 Low Volatility Sub-strategy is -28.5 days, which is larger, thus better compared to the benchmark QQQ (-28.6 days) in the same period.
  • 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 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:
  • The maximum days under water over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 123 days, which is lower, thus better compared to the benchmark QQQ (163 days) in the same period.
  • Compared with QQQ (154 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 123 days is lower, thus better.

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:
  • Looking at the average days under water of 25 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 (35 days)
  • During the last 3 years, the average days under water is 25 days, which is lower, thus better than the value of 33 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.