'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:- Looking at the total return, or increase in value of 131.8% in the last 5 years of Vertex Pharmaceuticals, we see it is relatively greater, thus better in comparison to the benchmark SPY (66.6%)
- During the last 3 years, the total return is 122.1%, which is larger, thus better than the value of 36.1% from the benchmark.

'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 (10.8%) in the period of the last 5 years, the annual return (CAGR) of 18.3% of Vertex Pharmaceuticals is greater, thus better.
- Looking at annual performance (CAGR) in of 30.5% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (10.8%).

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Which means for our asset as example:- Compared with the benchmark SPY (19%) in the period of the last 5 years, the historical 30 days volatility of 39% of Vertex Pharmaceuticals is larger, thus worse.
- Compared with SPY (22%) in the period of the last 3 years, the historical 30 days volatility of 36% is higher, thus worse.

'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.'

Using this definition on our asset we see for example:- The downside risk over 5 years of Vertex Pharmaceuticals is 24.9%, which is higher, thus worse compared to the benchmark SPY (13.9%) in the same period.
- During the last 3 years, the downside risk is 21.9%, which is greater, thus worse than the value of 16.2% from the benchmark.

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (0.43) in the period of the last 5 years, the Sharpe Ratio of 0.41 of Vertex Pharmaceuticals is smaller, thus worse.
- During the last 3 years, the ratio of return and volatility (Sharpe) is 0.78, which is greater, thus better than the value of 0.38 from the benchmark.

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Applying this definition to our asset in some examples:- Looking at the downside risk / excess return profile of 0.64 in the last 5 years of Vertex Pharmaceuticals, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.59)
- Compared with SPY (0.52) in the period of the last 3 years, the downside risk / excess return profile of 1.28 is higher, thus better.

'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.'

Using this definition on our asset we see for example:- Looking at the Downside risk index of 21 in the last 5 years of Vertex Pharmaceuticals, we see it is relatively greater, thus worse in comparison to the benchmark SPY (5.9 )
- Compared with SPY (6.98 ) in the period of the last 3 years, the Ulcer Ratio of 8.43 is higher, thus worse.

'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.'

Which means for our asset as example:- Looking at the maximum reduction from previous high of -49.1 days in the last 5 years of Vertex Pharmaceuticals, we see it is relatively lower, thus worse in comparison to the benchmark SPY (-33.7 days)
- Looking at maximum drop from peak to valley in of -21.2 days in the period of the last 3 years, we see it is relatively larger, thus better 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.'

Which means for our asset as example:- Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 481 days of Vertex Pharmaceuticals is greater, thus worse.
- Looking at maximum days under water in of 195 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (139 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.'

Using this definition on our asset we see for example:- Looking at the average days under water of 127 days in the last 5 years of Vertex Pharmaceuticals, we see it is relatively higher, thus worse in comparison to the benchmark SPY (44 days)
- During the last 3 years, the average days below previous high is 51 days, which is larger, thus worse than the value of 41 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.