'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 81.1%, which is higher, thus better compared to the benchmark SPY (63%) in the same period.
- During the last 3 years, the total return, or performance is 30.6%, which is smaller, thus worse than the value of 33.5% 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.'

Using this definition on our asset we see for example:- Looking at the annual return (CAGR) of 12.6% in the last 5 years of Vertex Pharmaceuticals, we see it is relatively greater, thus better in comparison to the benchmark SPY (10.3%)
- During the last 3 years, the annual performance (CAGR) is 9.3%, which is lower, thus worse than the value of 10.1% from the benchmark.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (21.6%) in the period of the last 5 years, the volatility of 33.7% of Vertex Pharmaceuticals is higher, thus worse.
- During the last 3 years, the historical 30 days volatility is 35.7%, which is higher, thus worse than the value of 25.1% from the benchmark.

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

Using this definition on our asset we see for example:- Compared with the benchmark SPY (15.6%) in the period of the last 5 years, the downside deviation of 23.6% of Vertex Pharmaceuticals is greater, thus worse.
- During the last 3 years, the downside risk is 26%, which is larger, thus worse than the value of 18.1% from the benchmark.

'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 risk / return profile (Sharpe) over 5 years of Vertex Pharmaceuticals is 0.3, which is lower, thus worse compared to the benchmark SPY (0.36) in the same period.
- During the last 3 years, the risk / return profile (Sharpe) is 0.19, which is lower, thus worse than the value of 0.3 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.'

Which means for our asset as example:- The ratio of annual return and downside deviation over 5 years of Vertex Pharmaceuticals is 0.43, which is lower, thus worse compared to the benchmark SPY (0.5) in the same period.
- Compared with SPY (0.42) in the period of the last 3 years, the ratio of annual return and downside deviation of 0.26 is lower, thus worse.

'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:- 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 (8.88 )
- Compared with SPY (11 ) in the period of the last 3 years, the Downside risk index of 22 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:- Looking at the maximum reduction from previous high of -41.6 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)
- Compared with SPY (-33.7 days) in the period of the last 3 years, the maximum DrawDown 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'

Using this definition on our asset we see for example:- The maximum time in days below previous high water mark over 5 years of Vertex Pharmaceuticals is 521 days, which is higher, thus worse compared to the benchmark SPY (273 days) in the same period.
- During the last 3 years, the maximum days under water is 521 days, which is larger, thus worse than the value of 273 days from the benchmark.

'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:- The average time in days below previous high water mark over 5 years of Vertex Pharmaceuticals is 138 days, which is larger, thus worse compared to the benchmark SPY (57 days) in the same period.
- During the last 3 years, the average days under water is 190 days, which is larger, thus worse than the value of 73 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.