'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 (61.3%) in the period of the last 5 years, the total return, or performance of 95.4% of Vertex Pharmaceuticals is larger, thus better.
- During the last 3 years, the total return, or increase in value is 75.4%, which is higher, thus better than the value of 31.6% from the benchmark.

'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 compounded annual growth rate (CAGR) over 5 years of Vertex Pharmaceuticals is 14.4%, which is higher, thus better compared to the benchmark SPY (10%) in the same period.
- Looking at annual return (CAGR) in of 20.6% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (9.6%).

'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:- Compared with the benchmark SPY (20.8%) in the period of the last 5 years, the 30 days standard deviation of 33.3% of Vertex Pharmaceuticals is greater, thus worse.
- During the last 3 years, the historical 30 days volatility is 34.8%, which is higher, thus worse than the value of 24% 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:- Looking at the downside deviation of 23.3% in the last 5 years of Vertex Pharmaceuticals, we see it is relatively greater, 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 25.1% is higher, 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:- Compared with the benchmark SPY (0.36) in the period of the last 5 years, the risk / return profile (Sharpe) of 0.36 of Vertex Pharmaceuticals is higher, thus better.
- During the last 3 years, the ratio of return and volatility (Sharpe) is 0.52, which is larger, thus better than the value of 0.3 from the benchmark.

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Using this definition on our asset we see for example:- Looking at the downside risk / excess return profile of 0.51 in the last 5 years of Vertex Pharmaceuticals, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.49)
- Looking at downside risk / excess return profile in of 0.72 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.4).

'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.'

Which means for our asset as example:- Looking at the Downside risk index of 18 in the last 5 years of Vertex Pharmaceuticals, we see it is relatively higher, thus worse in comparison to the benchmark SPY (7.61 )
- Looking at Downside risk index in of 22 in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (8.93 ).

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Applying this definition to our asset in some examples:- The maximum reduction from previous high over 5 years of Vertex Pharmaceuticals is -41.6 days, which is lower, thus worse compared to the benchmark SPY (-33.7 days) in the same period.
- Compared with SPY (-33.7 days) in the period of the last 3 years, the maximum drop from peak to valley of -41.6 days is lower, thus worse.

'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 (185 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 521 days of Vertex Pharmaceuticals is larger, thus worse.
- Compared with SPY (185 days) in the period of the last 3 years, the maximum days below previous high of 521 days is larger, 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:- Looking at the average time in days below previous high water mark of 139 days in the last 5 years of Vertex Pharmaceuticals, we see it is relatively greater, thus worse in comparison to the benchmark SPY (46 days)
- During the last 3 years, the average days below previous high is 194 days, which is greater, thus worse than the value of 44 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 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.