'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:- The total return, or increase in value over 5 years of Vertex Pharmaceuticals is 107.8%, which is smaller, thus worse compared to the benchmark SPY (121.6%) in the same period.
- Looking at total return, or performance in of 15.2% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (64.5%).

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (17.3%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 15.8% of Vertex Pharmaceuticals is lower, thus worse.
- Compared with SPY (18.1%) in the period of the last 3 years, the annual return (CAGR) of 4.8% is smaller, thus worse.

'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.'

Using this definition on our asset we see for example:- The historical 30 days volatility over 5 years of Vertex Pharmaceuticals is 36.2%, which is greater, thus worse compared to the benchmark SPY (18.7%) in the same period.
- During the last 3 years, the historical 30 days volatility is 35.2%, which is larger, thus worse than the value of 22.5% from the benchmark.

'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:- The downside volatility over 5 years of Vertex Pharmaceuticals is 23.7%, which is greater, thus worse compared to the benchmark SPY (13.5%) in the same period.
- Compared with SPY (16.4%) in the period of the last 3 years, the downside volatility of 25.7% is larger, thus worse.

'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:- The risk / return profile (Sharpe) over 5 years of Vertex Pharmaceuticals is 0.37, which is lower, thus worse compared to the benchmark SPY (0.79) in the same period.
- During the last 3 years, the ratio of return and volatility (Sharpe) is 0.07, which is smaller, thus worse than the value of 0.69 from the benchmark.

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (1.09) in the period of the last 5 years, the excess return divided by the downside deviation of 0.56 of Vertex Pharmaceuticals is smaller, thus worse.
- During the last 3 years, the downside risk / excess return profile is 0.09, which is smaller, thus worse than the value of 0.95 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:- The Downside risk index over 5 years of Vertex Pharmaceuticals is 15 , which is greater, thus worse compared to the benchmark SPY (5.58 ) in the same period.
- Compared with SPY (6.83 ) in the period of the last 3 years, the Ulcer Ratio of 17 is larger, 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 Vertex Pharmaceuticals is -38.1 days, which is lower, thus worse compared to the benchmark SPY (-33.7 days) in the same period.
- During the last 3 years, the maximum reduction from previous high is -38.1 days, which is smaller, thus worse than the value of -33.7 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). 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'

Which means for our asset as example:- Compared with the benchmark SPY (139 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 260 days of Vertex Pharmaceuticals 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 260 days is greater, 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:- Compared with the benchmark SPY (33 days) in the period of the last 5 years, the average time in days below previous high water mark of 70 days of Vertex Pharmaceuticals is greater, thus worse.
- During the last 3 years, the average days under water is 81 days, which is greater, thus worse than the value of 35 days from the benchmark.

Historical returns have been extended using synthetic data.
[Show Details]

- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of Vertex Pharmaceuticals 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.