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Treynor Ratio Calculator
Risk-adjusted return relative to systematic risk (beta).
Treynor Ratio
8.75
The Treynor ratio divides excess return (portfolio return minus the risk-free rate) by beta, measuring return earned per unit of market risk rather than total risk.
It's most useful for comparing well-diversified portfolios, since it only accounts for systematic (market) risk and ignores risk that diversification could have removed.
FAQ
How is Treynor different from Sharpe?
Sharpe divides excess return by total volatility (standard deviation); Treynor divides it by beta (systematic/market risk only), making Treynor more relevant for diversified portfolios where unsystematic risk is minimal.
When should you use Treynor over Sharpe?
Treynor is most appropriate for well-diversified portfolios, since it assumes unsystematic risk has already been diversified away — for concentrated portfolios, Sharpe is usually more informative.