Treynor Ratio Calculator

✖The Expected Portfolio Return is the combination of the expected returns, or averages of probability distributions of possible returns, of all the assets in an investment portfolio.ⓘ Expected Portfolio Return [R_p]			+10% -10%
✖The Risk Free Rate is the theoretical rate of return of an investment with zero risks.ⓘ Risk Free Rate [R_f]			+10% -10%
✖The Beta of the Portfolio is the weighted sum of the individual asset betas.ⓘ Beta of the Portfolio [βp]			+10% -10%

✖Treynor's Ratio is a financial metric used to evaluate the risk-adjusted performance of an investment or a portfolio.ⓘ Treynor Ratio [T_r]

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Formula

✖

Treynor Ratio

Formula

`"T"_{"r"} = ("R"_{"p"}-"R"_{"f"})/"βp"`

Example

`"5.882353"=("8"-"3")/"0.85"`

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Treynor Ratio Solution

STEP 0: Pre-Calculation Summary

Formula Used

Treynor's Ratio = (Expected Portfolio Return-Risk Free Rate)/Beta of the Portfolio
T_r = (R_p-R_f)/βp
This formula uses 4 Variables

Variables Used

Treynor's Ratio - Treynor's Ratio is a financial metric used to evaluate the risk-adjusted performance of an investment or a portfolio.
Expected Portfolio Return - The Expected Portfolio Return is the combination of the expected returns, or averages of probability distributions of possible returns, of all the assets in an investment portfolio.
Risk Free Rate - The Risk Free Rate is the theoretical rate of return of an investment with zero risks.
Beta of the Portfolio - The Beta of the Portfolio is the weighted sum of the individual asset betas.

STEP 1: Convert Input(s) to Base Unit

Expected Portfolio Return: 8 --> No Conversion Required
Risk Free Rate: 3 --> No Conversion Required
Beta of the Portfolio: 0.85 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

T_r = (R_p-R_f)/βp --> (8-3)/0.85

Evaluating ... ...

T_r = 5.88235294117647

STEP 3: Convert Result to Output's Unit

5.88235294117647 --> No Conversion Required

FINAL ANSWER

5.88235294117647 ≈ 5.882353 <-- Treynor's Ratio

(Calculation completed in 00.004 seconds)

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Credits

Created by Vishnu K

BMS College of Engineering (BMSCE), Bangalore

Vishnu K has created this Calculator and 200+ more calculators!

Verified by Kashish Arora

Satyawati College (DU), New Delhi

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< 22 Investment Calculators

Portfolio Standard Deviation

Go Portfolio Standard Deviation = sqrt((Asset Weight)^2*Variance of Returns on Assets 1^2+(Asset Weight)^2*Variance of Returns on Assets 2^2+2*(Asset Weight*Asset Weight*Variance of Returns on Assets 1*Variance of Returns on Assets 2*Portfolio Correlation Coefficient))

Portfolio Variance

Go Portfolio Variance = (Asset Weight)^2*Variance of Returns on Assets 1^2+(Asset Weight)^2*Variance of Returns on Assets 2^2+2*(Asset Weight*Asset Weight*Variance of Returns on Assets 1*Variance of Returns on Assets 2*Portfolio Correlation Coefficient)

Jensen's Alpha

Go Jensen's Alpha = Annual Return on Investment-(Risk Free Interest Rate+Beta of the Portfolio*(Annual return of the market benchmark-Risk Free Interest Rate))

Compound Interest

Go Future Value of Investment = Principal Investment Amount*(1+(Annual Interest Rate/Number of Periods))^(Number of Periods*Number of Years Money is Invested)

Certificate of Deposit

Go Certificate of Deposit = Initial Deposit Amount*(1+(Annual Nominal Interest Rate/Compounding Periods))^(Compounding Periods*Number of Years)

Actuarial Method Unearned Interest Loan

Go Actuarial Method Unearned Interest Loan = (Number of Remaining Monthly Payments*Monthly Payment*Annual Percentage Rate)/(100+Annual Percentage Rate)

Equivalent Annual Annuity

Go Equivalent Annuity Cashflow = (Rate per Period*(Net Present Value (NPV)))/(1-(1+Rate per Period)^-Number of Periods)

Portfolio Expected Return

Go Portfolio Expected Return = Asset Weight*(Expected Return on Asset 1)+Asset Weight*(Expected Return on Asset 2)

Total Stock Return

Go Total Stock Return = ((Ending Stock Price-Initial Stock Price)+Dividend)/Initial Stock Price

Annuity Payment

Go Annuity Payment = (Rate per Period*Present Value)/(1-(1+Rate per Period)^-Number of Periods)

Value at Risk

Go Value at Risk = -Mean of Profit and Loss+Standard Deviation of Profit and Loss*Standard Normal Variate

Profitability Index

Go Profitability Index (PI) = (Net Present Value (NPV)+Initial Investment)/Initial Investment

Sharpe Ratio

Go Sharpe Ratio = (Expected Portfolio Return-Risk Free Rate)/Portfolio Standard Deviation

Capital Gains Yield

Go Capital Gains Yield = (Current Stock Price-Initial Stock Price)/Initial Stock Price

Treynor Ratio

Go Treynor's Ratio = (Expected Portfolio Return-Risk Free Rate)/Beta of the Portfolio

Average Return on Investment

Go Average Return = modulus(Total Value of Return)/Total Number of Returns

Information Ratio

Go Information Ratio = (Portfolio Return-Benchmark Return)/Tracking Error

Rate of Return

Go Rate of Return = ((Current Value-Original Value)/Original Value)*100

Straight Line Depreciation

Go Straight Line Depreciation = (Asset's Cost-Salvage)/Life

Portfolio Turnover Rate

Go Porfolio Turnover Rate = (Total Sales and Purchases of Shares/Average Net Assets)*100

Real Rate of Return

Go Real Rate of Return = ((1+Nominal Rate)/(1+Inflation Rate))-1

Risk Premium

Go Risk Premium = Return on Investment (ROI)-Risk Free Return

Treynor Ratio Formula

Treynor's Ratio = (Expected Portfolio Return-Risk Free Rate)/Beta of the Portfolio
T_r = (R_p-R_f)/βp

What is Treynor Ratio?

Treynor's Ratio is particularly useful in the field of portfolio management to assess how much excess return a portfolio generates per unit of systematic risk, often measured by beta.
Treynor's Ratio indicates how much excess return the portfolio generates per unit of systematic risk it takes on. A higher Treynor's Ratio suggests better risk-adjusted performance.

Keep in mind that Treynor's Ratio, like any financial metric, has its limitations. It relies heavily on the accuracy of beta as a measure of systematic risk, which may not always accurately capture the true risk profile of a portfolio. Additionally, the use of past returns to calculate the ratio may not necessarily predict future performance accurately. Therefore, it's important to use Treynor's Ratio in conjunction with other metrics and qualitative analysis when evaluating investment decisions.

How to Calculate Treynor Ratio?

Treynor Ratio calculator uses Treynor's Ratio = (Expected Portfolio Return-Risk Free Rate)/Beta of the Portfolio to calculate the Treynor's Ratio, The Treynor Ratio formula is defined as a financial metric used to evaluate the risk-adjusted performance of an investment or a portfolio. It was developed by Jack Treynor, an economist and financial theorist. Treynor's Ratio is denoted by T_r symbol.

How to calculate Treynor Ratio using this online calculator? To use this online calculator for Treynor Ratio, enter Expected Portfolio Return (R_p), Risk Free Rate (R_f) & Beta of the Portfolio (βp) and hit the calculate button. Here is how the Treynor Ratio calculation can be explained with given input values -> 5.882353 = (8-3)/0.85.

FAQ

What is Treynor Ratio?

The Treynor Ratio formula is defined as a financial metric used to evaluate the risk-adjusted performance of an investment or a portfolio. It was developed by Jack Treynor, an economist and financial theorist and is represented as T_r = (R_p-R_f)/βp or Treynor's Ratio = (Expected Portfolio Return-Risk Free Rate)/Beta of the Portfolio. The Expected Portfolio Return is the combination of the expected returns, or averages of probability distributions of possible returns, of all the assets in an investment portfolio, The Risk Free Rate is the theoretical rate of return of an investment with zero risks & The Beta of the Portfolio is the weighted sum of the individual asset betas.

How to calculate Treynor Ratio?

The Treynor Ratio formula is defined as a financial metric used to evaluate the risk-adjusted performance of an investment or a portfolio. It was developed by Jack Treynor, an economist and financial theorist is calculated using Treynor's Ratio = (Expected Portfolio Return-Risk Free Rate)/Beta of the Portfolio. To calculate Treynor Ratio, you need Expected Portfolio Return (R_p), Risk Free Rate (R_f) & Beta of the Portfolio (βp). With our tool, you need to enter the respective value for Expected Portfolio Return, Risk Free Rate & Beta of the Portfolio and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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