FINANCIAL CALCULATORS
Treynor Ratio Calculator
Calculate your portfolio’s return per unit of market risk with our Treynor Ratio Calculator.
What is the Treynor Ratio Calculator & How does it work?
The Treynor Ratio is a financial metric used to evaluate the return of a portfolio in relation to its risk. It helps investors understand how much excess return they are receiving for each unit of market risk taken on.
To calculate the Treynor Ratio, you need two main inputs: the portfolio’s excess return (the difference between the portfolio’s return and the risk-free rate) and the beta of the portfolio. Beta measures the volatility of a portfolio relative to the market.
To calculate the Treynor Ratio, you need two main inputs: the portfolio’s excess return (the difference between the portfolio’s return and the risk-free rate) and the beta of the portfolio. Beta measures the volatility of a portfolio relative to the market.
Treynor Ratio = frac{Excess Return}{Beta}
Excess Return = Portfolio Return – Risk-Free Rate
Beta = Measure of portfolio’s volatility relative to the market
Beta = Measure of portfolio’s volatility relative to the market
Parameters
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Frequently Asked Questions
What is the Treynor Ratio?
The Treynor Ratio measures a portfolio’s excess return per unit of market risk.
How do I calculate the Treynor Ratio?
Subtract the risk-free rate from your portfolio’s return, then divide by the portfolio’s beta.
Why is the risk-free rate important in this calculation?
It represents the return on an investment with zero risk, used to determine excess return.
What does a higher Treynor Ratio indicate?
A higher ratio indicates better performance per unit of market risk taken.
Can I use this calculator for any type of portfolio?
Yes, it can be used for various types of portfolios, including stocks, bonds, and mutual funds.
How often should I calculate my Treynor Ratio?
It’s best to calculate it periodically, such as quarterly or annually, to monitor performance.
What is beta in the context of the Treynor Ratio?
Beta measures a portfolio’s volatility relative to the market. A beta of 1 indicates average volatility.
Results are for informational purposes only and do not constitute professional advice.