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Treynor Ratio Calculator

Measure the risk-adjusted return of a portfolio relative to systematic market risk.

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Calculation Parameters

Specify your inputs below.

Calculated Result

Portfolio Excess Return 9.50%
Treynor Ratio 7.92
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Expert Tip

The Treynor ratio evaluates performance based on systemic risk (beta), whereas the Sharpe ratio uses total risk (standard deviation).

How this Calculator Works

This calculator computes the Treynor Ratio, which measures the excess return generated per unit of systematic risk (Beta) instead of total risk. Unlike the Sharpe Ratio, it is ideal for evaluating well-diversified portfolios that have eliminated unsystematic risk. Equity managers use it to rate investment efficiency.

Formula & Methodology

Treynor Ratio = (Portfolio Return - Risk-Free Rate) / Portfolio Beta - Portfolio Return is the average annual rate of return of the asset portfolio. - Risk-Free Rate is the return on riskless deposits. - Portfolio Beta is the systematic risk coefficient of the portfolio.

Step-by-Step Calculation Example

Here is a step-by-step example showing how the calculations are performed:

A diversified equity fund yields a return of 11% with a Beta of 1.25. The risk-free interest rate is 3%. 1. Calculate excess return: 11% - 3% = 8%. 2. Divide by Beta: 8% / 1.25 = 6.40. Result: The Treynor Ratio is 6.40.

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Detailed Insights & Expert Guide

ℹ️ About this Calculation

This investment analytics calculator evaluates portfolio yield, compounding growth, risk-adjusted returns, present/future asset valuations, and capital growth metrics based on CFA and modern portfolio theory (MPT) principles.

Variable Glossary

Input

Investment Parameters

Initial principal, periodic contribution, interest rate, discount factor, holding period, or asset price inputs.

Parameter

Performance Metrics

Compound Annual Growth Rate (CAGR %), Net Present Value (NPV), Internal Rate of Return (IRR), or Sharpe ratio.

How to Calculate Step-by-Step

1

Step 1

Enter your initial investment capital, asset purchase prices, or cash flow streams.

2

Step 2

Set compounding frequency, discount rate, or benchmark risk-free rate factors.

3

Step 3

Review calculated total return value, annualized growth %, or risk-adjusted alpha/beta statistics.

FAQ

How does compounding frequency impact investment returns?
More frequent compounding (e.g. monthly or daily vs. annually) generates higher effective annual yields (APY) because interest is calculated on accumulated interest earlier in the period.
What is the difference between Sharpe Ratio and Sortino Ratio?
The Sharpe ratio divides excess return by total standard deviation (both upside and downside volatility), whereas the Sortino ratio divides excess return by downside deviation only.
Should investment calculators replace professional wealth management?
No. Investment calculators model financial mathematics under assumed growth rates. Actual market performance fluctuates, so consult a licensed financial planner (CFP) or RIA for personalized advice.