'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 investmentâ€™s overall performance.'

Which means for our asset as example:- The total return over 5 years of Caterpillar is 96.7%, which is larger, thus better compared to the benchmark SPY (60.6%) in the same period.
- During the last 3 years, the total return is 99.8%, which is higher, thus better than the value of 38% from the benchmark.

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Applying this definition to our asset in some examples:- Looking at the annual performance (CAGR) of 14.5% in the last 5 years of Caterpillar, we see it is relatively greater, thus better in comparison to the benchmark SPY (10%)
- During the last 3 years, the annual performance (CAGR) is 26%, which is higher, thus better than the value of 11.3% from the benchmark.

'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.'

Which means for our asset as example:- The 30 days standard deviation over 5 years of Caterpillar is 33.4%, which is greater, thus worse compared to the benchmark SPY (21.5%) in the same period.
- Looking at 30 days standard deviation in of 29.7% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (17.9%).

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (15.5%) in the period of the last 5 years, the downside volatility of 23.2% of Caterpillar is larger, thus worse.
- Looking at downside risk in of 19.6% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (12.5%).

'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 ratio of return and volatility (Sharpe) over 5 years of Caterpillar is 0.36, which is higher, thus better compared to the benchmark SPY (0.35) in the same period.
- Compared with SPY (0.49) in the period of the last 3 years, the Sharpe Ratio of 0.79 is greater, thus better.

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Which means for our asset as example:- The ratio of annual return and downside deviation over 5 years of Caterpillar is 0.52, which is greater, thus better compared to the benchmark SPY (0.48) in the same period.
- Compared with SPY (0.71) in the period of the last 3 years, the excess return divided by the downside deviation of 1.2 is greater, thus better.

'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.'

Applying this definition to our asset in some examples:- Looking at the Downside risk index of 15 in the last 5 years of Caterpillar, we see it is relatively greater, thus worse in comparison to the benchmark SPY (9.55 )
- Compared with SPY (10 ) in the period of the last 3 years, the Downside risk index of 13 is higher, thus worse.

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum drop from peak to valley of -39.5 days of Caterpillar is lower, thus worse.
- During the last 3 years, the maximum drop from peak to valley is -31.8 days, which is smaller, thus worse than the value of -24.5 days from the benchmark.

'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:- Compared with the benchmark SPY (431 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 485 days of Caterpillar is greater, thus worse.
- During the last 3 years, the maximum days under water is 383 days, which is lower, thus better than the value of 431 days from the benchmark.

'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 below previous high of 167 days in the last 5 years of Caterpillar, we see it is relatively larger, thus worse in comparison to the benchmark SPY (105 days)
- Looking at average days below previous high in of 118 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (144 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 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.