Enter Portfolio Inputs
Example Data Table
| Scenario | Portfolio Return (%) | Risk-Free Rate (%) | Beta | Treynor Ratio | Insight |
|---|---|---|---|---|---|
| Growth Fund A | 14.00 | 4.00 | 1.10 | 9.0909 | Solid excess return with moderate market sensitivity. |
| Income Fund B | 10.00 | 4.00 | 0.70 | 8.5714 | Lower beta, but slightly weaker reward efficiency. |
| Aggressive Fund C | 18.00 | 4.00 | 1.60 | 8.7500 | High return, though systematic risk also increased. |
| Defensive Fund D | 9.00 | 4.00 | 0.45 | 11.1111 | Best reward per market-risk unit among examples. |
Formula Used
Treynor Ratio = (Portfolio Return − Risk-Free Rate) ÷ Portfolio Beta
This metric measures how much excess return a portfolio earns for each unit of systematic risk. It is best suited for diversified portfolios where unsystematic risk is already minimized.
Supporting calculations used in this page
- Excess Return = Portfolio Return − Risk-Free Rate
- CAPM Expected Return = Risk-Free Rate + Beta × (Market Return − Risk-Free Rate)
- Jensen Alpha = Portfolio Return − CAPM Expected Return
- Benchmark Treynor Ratio = (Benchmark Return − Risk-Free Rate) ÷ Benchmark Beta
- Excess Return Value = Investment Value × (Excess Return ÷ 100)
How to Use This Calculator
- Enter your portfolio return for the chosen period.
- Add the risk-free rate for the same period.
- Enter the portfolio beta. Beta must not be zero.
- Optionally enter market return for CAPM and Jensen alpha.
- Optionally add benchmark return and benchmark beta for comparison.
- Add investment value if you want a money-based excess return estimate.
- Select decimal precision, then click the calculate button.
- Review the result summary, interpretation, and sensitivity graph.
- Export the result table as CSV or PDF when needed.
FAQs
1) What does a higher Treynor ratio mean?
A higher value means the portfolio generated more excess return for each unit of systematic risk. It usually signals better market-risk efficiency than a lower value.
2) Why does beta matter in this calculation?
Beta measures how sensitive the portfolio is to market movements. The ratio uses beta because Treynor focuses only on systematic risk, not total volatility.
3) Can the Treynor ratio be negative?
Yes. A negative result appears when portfolio return is below the risk-free rate, or when beta is negative. That usually means weak or unusual risk-adjusted performance.
4) Is Treynor ratio better than Sharpe ratio?
Neither is universally better. Treynor uses beta and suits diversified portfolios. Sharpe uses standard deviation and is often better when total volatility matters.
5) Should I use monthly or annual returns?
Use any period you want, but keep every input on the same basis. Portfolio return, risk-free rate, and market return must match the chosen time period.
6) Can I compare two funds from different styles?
Yes, but compare funds with similar objectives and time periods whenever possible. Context matters because different strategies can have very different beta behavior.
7) What happens if beta is near zero?
The ratio becomes unstable because you are dividing by a very small number. That can create misleadingly large values, so near-zero beta needs careful interpretation.
8) Why compare against a benchmark?
Benchmark comparison shows whether your portfolio earned more or less excess return per unit of market risk than a reference strategy under the same assumptions.