Treynor Ratio Calculator

Calculate Treynor Ratio





Formula

The formula to calculate the Treynor Ratio (TR) is:

\[ TR = \frac{PR - RFR}{B} \]

Where:

What is the Treynor Ratio?

The Treynor ratio measures the excess return a given portfolio achieved per unit of risk the portfolio takes. In other words, the Treynor ratio is the reward-to-volatility ratio. The risk in this formula is determined by the portfolio’s beta.

Example Calculation

Consider an example where:

Using the formula to calculate the Treynor Ratio:

\[ TR = \frac{12 - 2}{1.5} = \frac{10}{1.5} \approx 6.67 \]

This means that the Treynor ratio for this example is approximately 6.67.