Financial Calculators
Treynor Ratio Calculator
Calculate the Treynor ratio from portfolio return, risk-free rate, and beta locally in your browser.
Measure risk-adjusted return per unit of systematic risk.
The Treynor ratio is the excess return of a portfolio over the risk-free rate divided by the portfolio beta: (Rp − Rf) / β. It measures return per unit of systematic (market) risk, making it suitable for well-diversified portfolios. Enter the portfolio return, risk-free rate, and beta as percentages (for returns) and a decimal (for beta). For example, with a 12% portfolio return, 4% risk-free rate, and 1.2 beta, the Treynor ratio is 6.67%. Interpretation: below 0 is poor, 0 to 0.5 is weak, 0.5 to 1 is acceptable, 1 to 2 is good, above 2 is excellent. Unlike the Sharpe ratio, it uses beta rather than standard deviation. All calculations stay in your browser.
Frequently Asked Questions
Everything you need to know about this tool, how it works, and privacy.
What is the Treynor ratio?
The Treynor ratio measures risk-adjusted return by dividing the excess return of a portfolio over the risk-free rate by the portfolio's beta (systematic risk): (Rp − Rf) / β. Unlike the Sharpe ratio which uses total standard deviation, the Treynor ratio uses only systematic risk, making it most appropriate for well-diversified portfolios where unsystematic risk is minimal.
How does the Treynor ratio differ from the Sharpe ratio?
The Sharpe ratio uses total standard deviation (both systematic and unsystematic risk) as the risk measure, while the Treynor ratio uses only beta (systematic/market risk). The Treynor ratio is preferred for well-diversified portfolios; the Sharpe ratio is better for evaluating individual assets or under-diversified portfolios where idiosyncratic risk matters.
How do I interpret the Treynor ratio?
Common benchmarks: below 0 is poor (negative excess return or negative beta), 0 to 0.5 is weak, 0.5 to 1 is acceptable, 1 to 2 is good, and above 2 is excellent. These are conventions; compare against relevant benchmarks and consider the market conditions. A higher Treynor ratio means more excess return per unit of systematic risk.
Can the Treynor ratio be negative?
Yes. If the portfolio return is less than the risk-free rate, the excess return is negative, giving a negative Treynor ratio. This indicates the portfolio underperformed a risk-free investment after adjusting for systematic risk. A negative beta with positive excess return also yields a negative ratio, which is difficult to interpret and suggests the portfolio moves opposite to the market.
Is my data uploaded?
No. All calculations run locally in your browser. CodeASystem does not upload or store the values you enter.