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.'

Applying this definition to our asset in some examples:
  • Looking at the total return of 206.4% 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 (151.5%)
  • Looking at total return in of 113.4% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (88.4%).

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:
  • The annual performance (CAGR) over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 25.1%, which is greater, thus better compared to the benchmark QQQ (20.3%) in the same period.
  • During the last 3 years, the compounded annual growth rate (CAGR) is 28.8%, which is larger, thus better than the value of 23.5% from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Looking at the volatility of 18.1% 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 (21.7%)
  • During the last 3 years, the 30 days standard deviation is 20.5%, which is smaller, thus better than the value of 24.7% 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:
  • Looking at the downside deviation of 12.7% 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 (15.5%)
  • During the last 3 years, the downside risk is 14.4%, which is lower, thus better than the value of 17.7% from the benchmark.

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 Sharpe Ratio over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 1.25, which is greater, thus better compared to the benchmark QQQ (0.82) in the same period.
  • During the last 3 years, the ratio of return and volatility (Sharpe) is 1.28, which is higher, thus better than the value of 0.85 from the benchmark.

Sortino:

'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:
  • The downside risk / excess return profile over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 1.78, which is higher, thus better compared to the benchmark QQQ (1.14) in the same period.
  • Looking at excess return divided by the downside deviation in of 1.82 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to QQQ (1.19).

Ulcer:

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Which means for our asset as example:
  • Compared with the benchmark QQQ (5.99 ) in the period of the last 5 years, the Downside risk index of 4.85 of NASDAQ 100 Low Volatility Sub-strategy is lower, thus better.
  • Compared with QQQ (6.6 ) in the period of the last 3 years, the Ulcer Ratio of 5.49 is smaller, thus better.

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 DrawDown over 5 years of NASDAQ 100 Low Volatility Sub-strategy is -27.8 days, which is greater, thus better compared to the benchmark QQQ (-28.6 days) in the same period.
  • Looking at maximum drop from peak to valley in of -27.8 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (-28.6 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark QQQ (163 days) in the period of the last 5 years, the maximum days under water of 175 days of NASDAQ 100 Low Volatility Sub-strategy is higher, thus worse.
  • Looking at maximum days below previous high in of 155 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to QQQ (154 days).

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.'

Applying this definition to our asset in some examples:
  • Looking at the average days below previous high of 38 days in the last 5 years of NASDAQ 100 Low Volatility Sub-strategy, we see it is relatively greater, thus worse in comparison to the benchmark QQQ (36 days)
  • During the last 3 years, the average days below previous high is 31 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.