The mathematical calculations for return annualization are astoundingly simple. Annualization is simply a compounding calculation. For a return over a period of any length, one can calculate the annualized return. This annualized return captures what the return would be over a standardized period of one year. It therefore provides a mathematically consistent way of comparing or ranking returns that have been calculated over periods of different length.

Time Calculations for Annualizing Returns: The Need for Standardization