'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:- The total return over 5 years of MercadoLibre is 487%, which is higher, thus better compared to the benchmark SPY (59.9%) in the same period.
- Looking at total return, or increase in value in of 207.3% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (34.2%).

'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:- The annual return (CAGR) over 5 years of MercadoLibre is 42.5%, which is larger, thus better compared to the benchmark SPY (9.8%) in the same period.
- Compared with SPY (10.3%) in the period of the last 3 years, the annual performance (CAGR) of 45.5% 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.'

Applying this definition to our asset in some examples:- Looking at the volatility of 45.8% in the last 5 years of MercadoLibre, we see it is relatively higher, thus worse in comparison to the benchmark SPY (18.7%)
- During the last 3 years, the volatility is 51.3%, which is larger, thus worse than the value of 21.5% 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:- The downside volatility over 5 years of MercadoLibre is 29.5%, which is higher, thus worse compared to the benchmark SPY (13.6%) in the same period.
- Compared with SPY (15.7%) in the period of the last 3 years, the downside risk of 33% is larger, thus worse.

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Using this definition on our asset we see for example:- Looking at the risk / return profile (Sharpe) of 0.87 in the last 5 years of MercadoLibre, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.39)
- Compared with SPY (0.36) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.84 is greater, thus better.

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Using this definition on our asset we see for example:- Looking at the excess return divided by the downside deviation of 1.36 in the last 5 years of MercadoLibre, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.54)
- Looking at excess return divided by the downside deviation in of 1.3 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (0.5).

'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:- Compared with the benchmark SPY (5.81 ) in the period of the last 5 years, the Downside risk index of 17 of MercadoLibre is larger, thus worse.
- Compared with SPY (6.86 ) in the period of the last 3 years, the Ulcer Ratio of 16 is higher, thus worse.

'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.'

Using this definition on our asset we see for example:- The maximum reduction from previous high over 5 years of MercadoLibre is -43 days, which is lower, thus worse compared to the benchmark SPY (-33.7 days) in the same period.
- Looking at maximum drop from peak to valley in of -39.8 days in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (-33.7 days).

'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). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum days under water of 264 days of MercadoLibre is higher, thus worse.
- Compared with SPY (139 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 242 days is higher, 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.'

Which means for our asset as example:- The average time in days below previous high water mark over 5 years of MercadoLibre is 76 days, which is higher, thus worse compared to the benchmark SPY (43 days) in the same period.
- During the last 3 years, the average time in days below previous high water mark is 61 days, which is higher, thus worse than the value of 39 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 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.