'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:- Compared with the benchmark SPY (71.5%) in the period of the last 5 years, the total return of 73.3% of Merck & Company is greater, thus better.
- Compared with SPY (48.3%) in the period of the last 3 years, the total return, or increase in value of 58.7% is greater, thus better.

'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 Merck & Company is 11.6%, which is larger, thus better compared to the benchmark SPY (11.4%) in the same period.
- Compared with SPY (14%) in the period of the last 3 years, the annual return (CAGR) of 16.6% 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 (13.5%) in the period of the last 5 years, the 30 days standard deviation of 19.6% of Merck & Company is higher, thus worse.
- Compared with SPY (12.8%) in the period of the last 3 years, the 30 days standard deviation of 18.1% is higher, thus worse.

'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:- The downside risk over 5 years of Merck & Company is 19.9%, which is greater, thus worse compared to the benchmark SPY (14.8%) in the same period.
- During the last 3 years, the downside volatility is 19.4%, which is higher, thus worse than the value of 14.6% from the benchmark.

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Which means for our asset as example:- The risk / return profile (Sharpe) over 5 years of Merck & Company is 0.47, which is lower, thus worse compared to the benchmark SPY (0.66) in the same period.
- Looking at Sharpe Ratio in of 0.78 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.9).

'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:- The ratio of annual return and downside deviation over 5 years of Merck & Company is 0.46, which is smaller, thus worse compared to the benchmark SPY (0.6) in the same period.
- During the last 3 years, the excess return divided by the downside deviation is 0.73, which is lower, thus worse than the value of 0.79 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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (3.99 ) in the period of the last 5 years, the Ulcer Index of 8.16 of Merck & Company is larger, thus worse.
- Looking at Ulcer Ratio in of 6.94 in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (4.09 ).

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (-19.3 days) in the period of the last 5 years, the maximum DrawDown of -21.3 days of Merck & Company is smaller, thus worse.
- During the last 3 years, the maximum DrawDown is -18.2 days, which is greater, thus better than the value of -19.3 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:- Looking at the maximum days below previous high of 390 days in the last 5 years of Merck & Company, we see it is relatively higher, thus worse in comparison to the benchmark SPY (187 days)
- Compared with SPY (139 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 217 days is larger, 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.'

Applying this definition to our asset in some examples:- Looking at the average days under water of 95 days in the last 5 years of Merck & Company, we see it is relatively larger, thus worse in comparison to the benchmark SPY (42 days)
- Compared with SPY (36 days) in the period of the last 3 years, the average days under water of 49 days is higher, thus worse.

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 & Company 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.