Treynor Ratio Calculator
Enter the return, the risk-free rate and beta to measure return earned per unit of market risk.
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Enter return, risk-free rate and beta to see the Treynor ratio.
Worked example
With these example inputs:
- Portfolio return10%
- Risk-free rate2%
- Beta1.2
Treynor ratio: 6.67
- Excess return8.0%
Frequently asked questions
How is the Treynor ratio calculated?
Subtract the risk-free rate from the return, then divide by beta. A 10% return, 2% risk-free rate and beta of 1.2 give a Treynor ratio of about 6.67.
How does it differ from the Sharpe ratio?
Treynor divides by beta, which measures market risk only, while Sharpe divides by total standard deviation. Treynor suits well-diversified portfolios where only market risk remains.
What is the Treynor ratio in simple terms?
It measures how much extra return a portfolio earns for its market risk. You take the return above the risk-free rate, then divide by beta. A higher result means more reward for each unit of risk. The tool does that division and shows the ratio for you.
What is beta?
Beta measures how much a portfolio moves with the overall market. A beta of one moves in step with the market. A beta above one swings more, and below one swings less. It stands for the market risk you cannot diversify away.
How is it different from the Sharpe ratio?
Both compare reward to risk, but they measure risk differently. The Sharpe ratio uses total volatility as the risk. The Treynor ratio uses only beta, the market part of risk. So Treynor fits a portfolio that is already well diversified.