Description

Microsoft Corporation develops, licenses, and supports software, services, devices, and solutions worldwide. Its Productivity and Business Processes segment offers Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Skype for Business, as well as related Client Access Licenses (CAL); Skype, Outlook.com, and OneDrive; LinkedIn that includes Talent, Learning, Sales, and Marketing solutions, as well as premium subscriptions; and Dynamics 365, a set of cloud-based and on-premises business solutions for small and medium businesses, large organizations, and divisions of enterprises. Its Intelligent Cloud segment licenses SQL and Windows Servers, Visual Studio, System Center, and related CALs; GitHub that provides a collaboration platform and code hosting service for developers; and Azure, a cloud platform. It also offers support services and Microsoft consulting services to assist customers in developing, deploying, and managing Microsoft server and desktop solutions; and training and certification to developers and IT professionals on various Microsoft products. Its More Personal Computing segment provides Windows original equipment manufacturer (OEM) licensing and other non-volume licensing of the Windows operating system; Windows Commercial, such as volume licensing of the Windows operating system, Windows cloud services, and other Windows commercial offerings; patent licensing; Windows Internet of Things; and MSN advertising. It also offers Surface, PC accessories, PCs, tablets, gaming and entertainment consoles, and other intelligent devices; Gaming, including Xbox hardware, and Xbox content and services; video games and third-party video game royalties; and Search, including Bing and Microsoft advertising. It sells its products through OEMs, distributors, and resellers; and directly through digital marketplaces, online stores, and retail stores. The company was founded in 1975 and is headquartered in Redmond, Washington.

Statistics (YTD)

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TotalReturn:

'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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (60.7%) in the period of the last 5 years, the total return, or performance of 240.3% of Microsoft is higher, thus better.
  • Compared with SPY (29.5%) in the period of the last 3 years, the total return, or performance of 76% is greater, thus better.

CAGR:

'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.'

Using this definition on our asset we see for example:
  • The compounded annual growth rate (CAGR) over 5 years of Microsoft is 27.8%, which is higher, thus better compared to the benchmark SPY (10%) in the same period.
  • Looking at annual performance (CAGR) in of 20.7% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (9%).

Volatility:

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Which means for our asset as example:
  • Compared with the benchmark SPY (20.8%) in the period of the last 5 years, the 30 days standard deviation of 29.9% of Microsoft is greater, thus worse.
  • Compared with SPY (24%) in the period of the last 3 years, the historical 30 days volatility of 32.9% is greater, thus worse.

DownVol:

'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.'

Which means for our asset as example:
  • Looking at the downside deviation of 20.5% in the last 5 years of Microsoft, we see it is relatively higher, thus worse in comparison to the benchmark SPY (15.3%)
  • Compared with SPY (17.6%) in the period of the last 3 years, the downside deviation of 22.8% is higher, thus worse.

Sharpe:

'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:
  • Looking at the risk / return profile (Sharpe) of 0.84 in the last 5 years of Microsoft, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.36)
  • Compared with SPY (0.27) in the period of the last 3 years, the Sharpe Ratio of 0.55 is higher, thus better.

Sortino:

'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:
  • Compared with the benchmark SPY (0.49) in the period of the last 5 years, the ratio of annual return and downside deviation of 1.23 of Microsoft is higher, thus better.
  • Compared with SPY (0.37) in the period of the last 3 years, the excess return divided by the downside deviation of 0.8 is larger, thus better.

Ulcer:

'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:
  • The Ulcer Index over 5 years of Microsoft is 8.83 , which is larger, thus worse compared to the benchmark SPY (7.52 ) in the same period.
  • During the last 3 years, the Ulcer Ratio is 11 , which is greater, thus worse than the value of 8.81 from the benchmark.

MaxDD:

'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:
  • The maximum reduction from previous high over 5 years of Microsoft is -30.2 days, which is greater, thus better compared to the benchmark SPY (-33.7 days) in the same period.
  • Looking at maximum drop from peak to valley in of -30.2 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (-33.7 days).

MaxDuration:

'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:
  • Looking at the maximum time in days below previous high water mark of 211 days in the last 5 years of Microsoft, we see it is relatively higher, thus worse in comparison to the benchmark SPY (182 days)
  • Looking at maximum time in days below previous high water mark in of 211 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (182 days).

AveDuration:

'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:
  • The average days under water over 5 years of Microsoft is 40 days, which is smaller, thus better compared to the benchmark SPY (45 days) in the same period.
  • Looking at average time in days below previous high water mark in of 51 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (43 days).

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

Allocations

Returns (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of Microsoft 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.