'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.'

Using this definition on our asset we see for example:- Looking at the total return, or performance of 439% in the last 5 years of MercadoLibre, we see it is relatively higher, thus better in comparison to the benchmark SPY (68.2%)
- During the last 3 years, the total return, or performance is 342.7%, which is greater, thus better than the value of 47.7% 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.'

Which means for our asset as example:- Compared with the benchmark SPY (11%) in the period of the last 5 years, the annual performance (CAGR) of 40.1% of MercadoLibre is higher, thus better.
- Compared with SPY (13.9%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 64.2% is greater, thus better.

'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:- Compared with the benchmark SPY (13.2%) in the period of the last 5 years, the 30 days standard deviation of 41.1% of MercadoLibre is higher, thus worse.
- Looking at historical 30 days volatility in of 43.6% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (12.4%).

'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:- The downside deviation over 5 years of MercadoLibre is 39.3%, which is larger, thus worse compared to the benchmark SPY (14.6%) in the same period.
- During the last 3 years, the downside volatility is 42.7%, which is higher, thus worse than the value of 14% 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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (0.64) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.92 of MercadoLibre is higher, thus better.
- Compared with SPY (0.92) in the period of the last 3 years, the Sharpe Ratio of 1.42 is higher, 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 (0.58) in the period of the last 5 years, the downside risk / excess return profile of 0.96 of MercadoLibre is larger, thus better.
- Compared with SPY (0.81) in the period of the last 3 years, the downside risk / excess return profile of 1.44 is higher, 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:- Looking at the Ulcer Ratio of 16 in the last 5 years of MercadoLibre, we see it is relatively higher, thus better in comparison to the benchmark SPY (3.95 )
- During the last 3 years, the Ulcer Ratio is 14 , which is greater, thus better than the value of 4 from the benchmark.

'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 (-19.3 days) in the period of the last 5 years, the maximum reduction from previous high of -43.5 days of MercadoLibre is lower, thus worse.
- During the last 3 years, the maximum DrawDown is -37.8 days, which is smaller, thus worse than the value of -19.3 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.'

Which means for our asset as example:- The maximum days below previous high over 5 years of MercadoLibre is 305 days, which is higher, thus worse compared to the benchmark SPY (187 days) in the same period.
- Compared with SPY (131 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 242 days is larger, thus worse.

'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.'

Using this definition on our asset we see for example:- Looking at the average time in days below previous high water mark of 87 days in the last 5 years of MercadoLibre, we see it is relatively higher, thus worse in comparison to the benchmark SPY (39 days)
- Looking at average time in days below previous high water mark in of 68 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (33 days).

Historical returns have been extended using synthetic data.
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- "Year" returns in the table above are not equal to the sum of monthly returns due to compounding.
- Performance results of MercadoLibre 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.