'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (81.9%) in the period of the last 5 years, the total return of 115.2% of Vertex Pharmaceuticals is higher, thus better.
- During the last 3 years, the total return, or performance is 49.3%, which is higher, thus better than the value of 46.1% 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:- Compared with the benchmark SPY (12.7%) in the period of the last 5 years, the annual performance (CAGR) of 16.6% of Vertex Pharmaceuticals is larger, thus better.
- During the last 3 years, the compounded annual growth rate (CAGR) is 14.3%, which is larger, thus better than the value of 13.5% from the benchmark.

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Which means for our asset as example:- Compared with the benchmark SPY (19.8%) in the period of the last 5 years, the 30 days standard deviation of 34.3% of Vertex Pharmaceuticals is greater, thus worse.
- Compared with SPY (23%) in the period of the last 3 years, the volatility of 34.4% is higher, thus worse.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Which means for our asset as example:- Looking at the downside risk of 23.1% in the last 5 years of Vertex Pharmaceuticals, we see it is relatively larger, thus worse in comparison to the benchmark SPY (14.5%)
- Looking at downside risk in of 24.8% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (16.8%).

'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.'

Using this definition on our asset we see for example:- Looking at the Sharpe Ratio of 0.41 in the last 5 years of Vertex Pharmaceuticals, we see it is relatively lower, thus worse in comparison to the benchmark SPY (0.52)
- Compared with SPY (0.48) in the period of the last 3 years, the Sharpe Ratio of 0.34 is lower, thus worse.

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (0.7) in the period of the last 5 years, the downside risk / excess return profile of 0.61 of Vertex Pharmaceuticals is lower, thus worse.
- During the last 3 years, the downside risk / excess return profile is 0.48, which is lower, thus worse than the value of 0.65 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:- Compared with the benchmark SPY (6.08 ) in the period of the last 5 years, the Ulcer Index of 18 of Vertex Pharmaceuticals is larger, thus worse.
- Compared with SPY (6.77 ) in the period of the last 3 years, the Ulcer Index of 22 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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum drop from peak to valley of -41.6 days of Vertex Pharmaceuticals is lower, thus worse.
- Looking at maximum drop from peak to valley in of -41.6 days in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (-33.7 days).

'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 (139 days) in the period of the last 5 years, the maximum days below previous high of 460 days of Vertex Pharmaceuticals is higher, thus worse.
- Compared with SPY (119 days) in the period of the last 3 years, the maximum days below previous high of 460 days is higher, 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.'

Using this definition on our asset we see for example:- The average days under water over 5 years of Vertex Pharmaceuticals is 119 days, which is larger, thus worse compared to the benchmark SPY (35 days) in the same period.
- During the last 3 years, the average time in days below previous high water mark is 155 days, which is greater, thus worse than the value of 27 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.