'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (36.4%) in the period of the last 5 years, the total return, or performance of 84.7% of Vertex Pharmaceuticals is larger, thus better.
- Compared with SPY (14.9%) in the period of the last 3 years, the total return of 141.4% is larger, 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.'

Which means for our asset as example:- The compounded annual growth rate (CAGR) over 5 years of Vertex Pharmaceuticals is 13.1%, which is greater, thus better compared to the benchmark SPY (6.4%) in the same period.
- Compared with SPY (4.7%) in the period of the last 3 years, the annual return (CAGR) of 34.1% 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.'

Using this definition on our asset we see for example:- The 30 days standard deviation over 5 years of Vertex Pharmaceuticals is 38.1%, which is larger, thus worse compared to the benchmark SPY (17.8%) in the same period.
- Compared with SPY (20%) in the period of the last 3 years, the volatility of 36.3% is higher, 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:- Looking at the downside deviation of 24.6% in the last 5 years of Vertex Pharmaceuticals, we see it is relatively larger, thus worse in comparison to the benchmark SPY (13.2%)
- Compared with SPY (15.1%) in the period of the last 3 years, the downside volatility of 21% is larger, thus worse.

'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.'

Applying this definition to our asset in some examples:- The ratio of return and volatility (Sharpe) over 5 years of Vertex Pharmaceuticals is 0.28, which is greater, thus better compared to the benchmark SPY (0.22) in the same period.
- Compared with SPY (0.11) in the period of the last 3 years, the Sharpe Ratio of 0.87 is higher, thus better.

'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.'

Applying this definition to our asset in some examples:- The downside risk / excess return profile over 5 years of Vertex Pharmaceuticals is 0.43, which is higher, thus better compared to the benchmark SPY (0.3) in the same period.
- Compared with SPY (0.15) in the period of the last 3 years, the ratio of annual return and downside deviation of 1.51 is larger, thus better.

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (4.93 ) in the period of the last 5 years, the Ulcer Ratio of 21 of Vertex Pharmaceuticals is larger, thus worse.
- Compared with SPY (5.58 ) in the period of the last 3 years, the Ulcer Ratio of 8.39 is greater, 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 DrawDown over 5 years of Vertex Pharmaceuticals is -49.1 days, which is smaller, thus worse compared to the benchmark SPY (-33.7 days) in the same period.
- During the last 3 years, the maximum DrawDown is -21.2 days, which is higher, thus better 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) in days.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum days under water of 481 days of Vertex Pharmaceuticals is larger, thus worse.
- Compared with SPY (139 days) in the period of the last 3 years, the maximum days under water of 195 days is greater, 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 below previous high of 128 days in the last 5 years of Vertex Pharmaceuticals, we see it is relatively larger, thus worse in comparison to the benchmark SPY (42 days)
- During the last 3 years, the average days under water is 51 days, which is greater, thus worse than the value of 36 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.