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.

'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Which means for our asset as example:- Compared with the benchmark QQQ (143.9%) in the period of the last 5 years, the total return, or performance of 191.5% of NASDAQ 100 Low Volatility Sub-strategy is higher, thus better.
- Compared with QQQ (20.5%) in the period of the last 3 years, the total return, or performance of 30.8% is higher, thus better.

'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.'

Applying this definition to our asset in some examples:- The compounded annual growth rate (CAGR) over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 23.9%, which is greater, thus better compared to the benchmark QQQ (19.6%) in the same period.
- Looking at compounded annual growth rate (CAGR) in of 9.4% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to QQQ (6.4%).

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark QQQ (25.4%) in the period of the last 5 years, the 30 days standard deviation of 19.5% of NASDAQ 100 Low Volatility Sub-strategy is lower, thus better.
- During the last 3 years, the 30 days standard deviation is 13.2%, which is lower, thus better than the value of 23.5% from the benchmark.

'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:- Compared with the benchmark QQQ (18%) in the period of the last 5 years, the downside risk of 13.2% of NASDAQ 100 Low Volatility Sub-strategy is lower, thus better.
- During the last 3 years, the downside volatility is 9.3%, which is lower, thus better than the value of 16.6% from the benchmark.

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Applying this definition to our asset in some examples:- The Sharpe Ratio over 5 years of NASDAQ 100 Low Volatility Sub-strategy is 1.1, which is larger, thus better compared to the benchmark QQQ (0.67) in the same period.
- Compared with QQQ (0.17) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 0.52 is larger, thus better.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark QQQ (0.95) in the period of the last 5 years, the ratio of annual return and downside deviation of 1.62 of NASDAQ 100 Low Volatility Sub-strategy is larger, thus better.
- Compared with QQQ (0.24) in the period of the last 3 years, the excess return divided by the downside deviation of 0.74 is larger, thus better.

'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 5.95 , which is smaller, thus better compared to the benchmark QQQ (14 ) in the same period.
- Compared with QQQ (17 ) in the period of the last 3 years, the Ulcer Ratio of 6.04 is lower, thus better.

'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 -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 drop from peak to valley is -13.6 days, which is larger, thus better than the value of -35.1 days from the benchmark.

'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:- Looking at the maximum time in days below previous high water mark 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)
- During the last 3 years, the maximum days under water is 273 days, which is lower, thus better than the value of 493 days from the benchmark.

'The Average 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. 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 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 (122 days)
- Looking at average days below previous high in of 72 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to QQQ (179 days).

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.