TotalReturn:
'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.'
Applying this definition to our asset in some examples:
- Looking at the total return, or performance of 444.1% in the last 5 years of NASDAQ 100 Strategy, we see it is relatively greater, thus better in comparison to the benchmark SPY (100.8%)
- Compared with SPY (31.2%) in the period of the last 3 years, the total return, or increase in value of 75.9% is greater, thus better.
CAGR:
'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:
- Looking at the annual return (CAGR) of 40.4% in the last 5 years of NASDAQ 100 Strategy, we see it is relatively greater, thus better in comparison to the benchmark SPY (15%)
- During the last 3 years, the annual performance (CAGR) is 20.7%, which is higher, thus better than the value of 9.5% from the benchmark.
Volatility:
'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 (20.9%) in the period of the last 5 years, the historical 30 days volatility of 18.9% of NASDAQ 100 Strategy is lower, thus better.
- Looking at historical 30 days volatility in of 15.4% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (17.6%).
DownVol:
'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:
- The downside risk over 5 years of NASDAQ 100 Strategy is 12.1%, which is smaller, thus better compared to the benchmark SPY (14.9%) in the same period.
- Compared with SPY (12.4%) in the period of the last 3 years, the downside volatility of 10% is lower, thus better.
Sharpe:
'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.'
Applying this definition to our asset in some examples:
- The ratio of return and volatility (Sharpe) over 5 years of NASDAQ 100 Strategy is 2.01, which is larger, thus better compared to the benchmark SPY (0.6) in the same period.
- During the last 3 years, theSharpe Ratio is 1.19, which is larger, thus better than the value of 0.4 from the benchmark.
Sortino:
'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.'
Using this definition on our asset we see for example:
- The ratio of annual return and downside deviation over 5 years of NASDAQ 100 Strategy is 3.14, which is larger, thus better compared to the benchmark SPY (0.84) in the same period.
- Compared with SPY (0.56) in the period of the last 3 years, the downside risk / excess return profile of 1.82 is greater, thus better.
Ulcer:
'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 (9.32 ) in the period of the last 5 years, the Downside risk index of 4.66 of NASDAQ 100 Strategy is smaller, thus better.
- During the last 3 years, the Ulcer Index is 4.75 , which is smaller, thus better than the value of 10 from the benchmark.
MaxDD:
'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'
Using this definition on our asset we see for example:
- The maximum drop from peak to valley over 5 years of NASDAQ 100 Strategy is -19.7 days, which is greater, thus better compared to the benchmark SPY (-33.7 days) in the same period.
- Compared with SPY (-24.5 days) in the period of the last 3 years, the maximum DrawDown of -11.2 days is larger, thus better.
MaxDuration:
'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.'
Using this definition on our asset we see for example:
- Compared with the benchmark SPY (488 days) in the period of the last 5 years, the maximum days under water of 300 days of NASDAQ 100 Strategy is smaller, thus better.
- During the last 3 years, the maximum days under water is 300 days, which is lower, thus better than the value of 488 days from the benchmark.
AveDuration:
'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:
- Looking at the average days under water of 55 days in the last 5 years of NASDAQ 100 Strategy, we see it is relatively lower, thus better in comparison to the benchmark SPY (123 days)
- Looking at average time in days below previous high water mark in of 78 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (177 days).
