'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.'

Applying this definition to our asset in some examples:- The total return over 5 years of Vertex Pharmaceuticals is 112.8%, which is higher, thus better compared to the benchmark SPY (67.9%) in the same period.
- During the last 3 years, the total return, or performance is 12.9%, which is smaller, thus worse than the value of 44.5% 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.'

Which means for our asset as example:- Looking at the annual performance (CAGR) of 16.3% in the last 5 years of Vertex Pharmaceuticals, we see it is relatively larger, thus better in comparison to the benchmark SPY (10.9%)
- Looking at annual performance (CAGR) in of 4.1% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (13.1%).

'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:- The volatility over 5 years of Vertex Pharmaceuticals is 33.2%, which is higher, thus worse compared to the benchmark SPY (21.4%) in the same period.
- Looking at historical 30 days volatility in of 30.6% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (18.7%).

'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:- The downside deviation over 5 years of Vertex Pharmaceuticals is 23.2%, which is greater, thus worse compared to the benchmark SPY (15.4%) in the same period.
- Looking at downside risk in of 23.2% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (13.3%).

'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:- Looking at the Sharpe Ratio of 0.42 in the last 5 years of Vertex Pharmaceuticals, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.39)
- Looking at risk / return profile (Sharpe) in of 0.05 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.56).

'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.'

Which means for our asset as example:- The downside risk / excess return profile over 5 years of Vertex Pharmaceuticals is 0.6, which is higher, thus better compared to the benchmark SPY (0.55) in the same period.
- During the last 3 years, the excess return divided by the downside deviation is 0.07, 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:- Looking at the Ulcer 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 (9.47 )
- During the last 3 years, the Ulcer Index is 22 , which is greater, thus worse than the value of 10 from the benchmark.

'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.'

Which means for our asset as example:- Looking at the maximum DrawDown of -41.6 days in the last 5 years of Vertex Pharmaceuticals, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (-33.7 days)
- During the last 3 years, the maximum DrawDown is -41.6 days, which is lower, thus worse than the value of -24.5 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'

Using this definition on our asset we see for example:- The maximum days below previous high over 5 years of Vertex Pharmaceuticals is 521 days, which is greater, thus worse compared to the benchmark SPY (354 days) in the same period.
- Looking at maximum time in days below previous high water mark in of 521 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (354 days).

'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.'

Applying this definition to our asset in some examples:- Looking at the average days under water of 138 days in the last 5 years of Vertex Pharmaceuticals, we see it is relatively greater, thus worse in comparison to the benchmark SPY (79 days)
- Looking at average time in days below previous high water mark in of 192 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (102 days).

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.