'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Which means for our asset as example:- Compared with the benchmark SPY (80%) in the period of the last 5 years, the total return, or increase in value of 57.7% of Merck is smaller, thus worse.
- During the last 3 years, the total return, or increase in value is 47%, which is higher, thus better than the value of 31.8% from the benchmark.

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Applying this definition to our asset in some examples:- The annual performance (CAGR) over 5 years of Merck is 9.6%, which is lower, thus worse compared to the benchmark SPY (12.5%) in the same period.
- Looking at compounded annual growth rate (CAGR) in of 13.7% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (9.7%).

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (21.3%) in the period of the last 5 years, the volatility of 23.2% of Merck is higher, thus worse.
- Compared with SPY (17.6%) in the period of the last 3 years, the historical 30 days volatility of 20.8% is greater, thus worse.

'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:- Compared with the benchmark SPY (15.3%) in the period of the last 5 years, the downside volatility of 16.2% of Merck is higher, thus worse.
- During the last 3 years, the downside volatility is 14.4%, which is greater, thus worse than the value of 12.3% from the benchmark.

'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.'

Applying this definition to our asset in some examples:- The risk / return profile (Sharpe) over 5 years of Merck is 0.3, which is lower, thus worse compared to the benchmark SPY (0.47) in the same period.
- Compared with SPY (0.41) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.54 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:- Looking at the ratio of annual return and downside deviation of 0.44 in the last 5 years of Merck, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (0.66)
- During the last 3 years, the excess return divided by the downside deviation is 0.78, which is higher, thus better than the value of 0.58 from the benchmark.

'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:- Compared with the benchmark SPY (9.43 ) in the period of the last 5 years, the Ulcer Ratio of 8.96 of Merck is smaller, thus better.
- Looking at Ulcer Ratio in of 7.88 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (10 ).

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum reduction from previous high of -27.3 days of Merck is larger, thus better.
- Looking at maximum drop from peak to valley in of -20.2 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (-24.5 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) in days.'

Applying this definition to our asset in some examples:- The maximum days under water over 5 years of Merck is 441 days, which is lower, thus better compared to the benchmark SPY (480 days) in the same period.
- During the last 3 years, the maximum days under water is 182 days, which is lower, thus better than the value of 480 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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (119 days) in the period of the last 5 years, the average days under water of 107 days of Merck is smaller, thus better.
- Compared with SPY (174 days) in the period of the last 3 years, the average days under water of 58 days is lower, thus better.

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 Merck 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.