'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:- The total return, or performance over 5 years of Caterpillar is 70.6%, which is larger, thus better compared to the benchmark SPY (67.5%) in the same period.
- Looking at total return, or performance in of 86.5% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (39.8%).

'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 Caterpillar is 11.3%, which is greater, thus better compared to the benchmark SPY (10.9%) in the same period.
- Compared with SPY (11.8%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 23.1% is larger, thus better.

'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.'

Applying this definition to our asset in some examples:- The historical 30 days volatility over 5 years of Caterpillar is 33.4%, which is larger, thus worse compared to the benchmark SPY (21.4%) in the same period.
- During the last 3 years, the historical 30 days volatility is 30.4%, which is higher, thus worse than the value of 18.7% from the benchmark.

'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.'

Which means for our asset as example:- The downside risk over 5 years of Caterpillar is 23.4%, which is greater, thus worse compared to the benchmark SPY (15.4%) in the same period.
- During the last 3 years, the downside volatility is 20.5%, which is greater, thus worse than the value of 13.3% from the benchmark.

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (0.39) in the period of the last 5 years, the Sharpe Ratio of 0.26 of Caterpillar is smaller, thus worse.
- Compared with SPY (0.5) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.68 is greater, 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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (0.54) in the period of the last 5 years, the excess return divided by the downside deviation of 0.38 of Caterpillar is smaller, thus worse.
- Looking at excess return divided by the downside deviation in of 1 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.7).

'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.'

Using this definition on our asset we see for example:- The Ulcer Ratio over 5 years of Caterpillar is 15 , which is higher, thus worse compared to the benchmark SPY (9.48 ) in the same period.
- During the last 3 years, the Ulcer Ratio is 13 , which is greater, thus worse than the value of 10 from the benchmark.

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Which means for our asset as example:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum reduction from previous high of -39.5 days of Caterpillar is smaller, thus worse.
- During the last 3 years, the maximum drop from peak to valley is -31.8 days, which is lower, thus worse than the value of -24.5 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 days below previous high of 485 days in the last 5 years of Caterpillar, we see it is relatively higher, thus worse in comparison to the benchmark SPY (358 days)
- Compared with SPY (358 days) in the period of the last 3 years, the maximum days under water of 383 days is greater, thus worse.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (80 days) in the period of the last 5 years, the average days under water of 166 days of Caterpillar is larger, thus worse.
- During the last 3 years, the average time in days below previous high water mark is 115 days, which is larger, thus worse than the value of 104 days from the benchmark.

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 Caterpillar 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.