Transparency is a feature. This page explains what drawdown and the Ulcer Index measure and why — in plain terms. The precise formulas and numeric conventions are documented in our internal methodology; the summary here is deliberate, not an omission.
All three of these measures start from the same idea: the wealth path. Beginning from a starting value of one, we let the return series compound period by period, producing a running record of how a single unit invested at the outset would have grown or shrunk. The path deliberately includes that initial starting point, which serves as the first peak. At each point in time we compare the current wealth to the highest level reached so far (the running peak). The gap between where the path sits now and its prior high-water mark is the drawdown — always zero or negative, since by construction the path can never be above its own running maximum.
Maximum drawdown is the deepest peak-to-trough decline observed anywhere along the wealth path — the single worst drop from a prior high to a subsequent low over the horizon supplied. It is reported as a negative number (or exactly zero if the series never fell), and it is not annualized: it describes the actual worst decline over whatever window you gave it. A series whose returns are never negative never draws down at all, so its maximum drawdown is zero. At least one period of history is needed for there to be any path to measure.
This companion view pinpoints when the worst episode happened rather than just how deep it went. It identifies three moments along the wealth path: the peak (the high-water mark the decline started from), the trough (the low point of the deepest drawdown), and the recovery (the first later moment at which wealth climbs back to reclaim that prior peak). If ties occur, the earliest matching moment is chosen. If the path never regains its prior peak before the history ends, the recovery is simply reported as absent — an unrecovered drawdown. This lets you read not only the magnitude of the worst stretch but its shape in time: how far it fell, and how long it took to heal (if it healed at all).
The Ulcer Index summarizes the overall pain of being underwater across the whole history, capturing both how deep drawdowns went and how long they lasted. Rather than focusing on the single worst point like maximum drawdown, it takes a root-mean-square of the drawdown at every point along the path — so prolonged or repeated declines register more heavily than a single brief dip. It is expressed in percentage-point units, is always zero or positive, and equals zero only when the path never declines. Like the other measures it is a historical, not annualized, figure and needs at least one period of history to compute.
