Portfolio balance strategy 5 years back test. 3.75 times better than NASDAQ 100 index!

Alex Ishenko
2 min readAug 10, 2024

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Hands-on quantitative trading portfolio strategies

Total gain is 3.75 times better!

Table of contents

  1. Main idea
  2. Dataset
  3. Back test
  4. Result
  5. Final thoughts
  6. Links

1. Main idea

The NASDAQ-100 is indeed a capitalization-weighted index. This means that larger companies with higher market capitalizations hold a larger weight in the index. Regarding rebalancing frequency, while it’s primarily rebalanced quarterly.

I developed a strategy that rebalancing strategy that uses AI and financial data to provide more frequent (daily, weekly, monthly). I already demonstrated how the strategy performs against equal-weighted portfolio. My rebalancing strategy uses only NASDAQ 100 constituent companies, but performed 3.75x times better then standard capitalization-weighted NASDAQ 100.

Now it’s time to check strategy against NASDAQ 100.

2. Dataset

I used data of NASDAQ 100 constituents.

3. Back test

Re-balance happened every 50 working days. Each re-balance cost is taken as 0.3% (broker commission)

Example of a portfolio from 2021–12–16 to 2022–02–28
Example of a portfolio from 2023–02–28 to 2023–05–09

And final chart

+142% Nasdaq 100 vs +533% strategy. Total profit from strategy is 3.75 times better!

4. Result

  • An AI-driven re-balancing strategy was developed and tested over a 5-year period.
  • Back testing over 5 years showed more then 3.75 times improvement in profit compared to NASDAQ 100 index, while maintaining similar diversification and risk levels.

5. Final thoughts

The AI-driven rebalancing strategy employed in the NASDAQ 100 portfolio yielded a substantial 3.75x performance enhancement over a 5-year period compared to a NASDAQ 100. This outcome underscores the potential benefits of active management and quantitative modeling in portfolio optimization.

To further validate the strategy, we plan to

  1. Deploy strategies in real world
  2. Test on other major indexes

6. Links

  1. https://www.linkedin.com/in/aishenko/
  2. https://aishenko.com
  3. https://qialex.me
  4. https://github.com/qialex
  5. https://www.kaggle.com/alexishenko

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Alex Ishenko
Alex Ishenko

Written by Alex Ishenko

Data and quantitative trading enthusiast

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