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Treynor Ratio Calculator

LAST UPDATE: September 2nd, 2018

Calculator

What is the Treynor Ratio?

The Treynor Ratio is the average return above the risk-free rate of return on an investment. The risk free rate of return can be an investment such as a U.S. Treasury investment or a diversified portfolio.

A high treynor ratio means that the investment is making a lot of money above the risk-free rate of return.

A low treynor ratio means that the investment is making only a little money above the risk-free rate of return.

A negative treynor ratio means that the investment is making less money than risk-free investment such as a US Treasury or diversified investment.

Formula

Treynor Ratio = (Portfolio’s Return – Risk Free Rate) / Portfolio Beta

Example

A portfolio has a return of 4.55%. The risk free rate is 1.75%. The portfolio Beta is 0.60.

Treynor Ratio = (0.0455 – 0.0175) / 0.60 = 0.028 / 0.60 = 0.0467

Therefore, this portfolio’s Treynor Ratio is 0.0467 or 4.67%

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