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Oct 14, 2020 · The Treynor ratio measures how much excess return a portfolio earned for each unit of systematic risk. Learn how to calculate it, what it shows, and how it differs from the Sharpe ratio.
- Will Kenton
- 2 min
What is the Treynor Ratio? Jack Treynor, an eminent American economist and one of the founding fathers of the Capital Asset Pricing Model, developed this metric. It measures the excess returns a financial asset or a group of securities earns for every extra unit of risk assumed by the portfolio.
- It is a performance ratio that helps in determining how much surplus return was generated for every risk unit a portfolio takes.
- A Treynor Ratio can be calculated by the given formula- Treynor Ratio = (Portfolio returns – Risk free rate of return)/Portfolio beta value
- The Treynor Ration helps investors to adjust the return of portfolios for calculated risk. If the Treynor Ratio is high, it signifies that the port...
- A Treynor ratio signifies that a fund has performed worse than the risk-free instrument. Note investors usually refrain from relying on this ratio...
- A higher Treynor Ratio is considered to be good for making investment choices.
Learn how to calculate the Treynor Ratio, a risk-adjusted return ratio that measures portfolio performance and is part of the Capital Asset Pricing Model. See an example of comparing two portfolios using the Treynor Ratio and its limitations.
The Treynor reward to volatility model (sometimes called the reward-to-volatility ratio or Treynor measure), named after Jack L. Treynor, is a measurement of the returns earned in excess of that which could have been earned on an investment that has no diversifiable risk (e.g., Treasury bills or a completely diversified portfolio), per unit of ...
Apr 25, 2024 · Treynor ratio is a metric that measures the excess returns of a portfolio per unit of beta, or systematic risk. Learn how to calculate it, compare it with Sharpe ratio, and apply it in finance and mutual funds.
Mar 5, 2024 · Learn how to calculate the Treynor ratio, a measure of a portfolio's excess return per unit of systematic risk, or the market volatility of the portfolio. Compare the Treynor ratio with the Sharpe ratio and see a calculation example using an Excel template.
May 22, 2023 · Learn how to measure the risk-adjusted return of an investment portfolio using the Treynor Ratio, a performance metric that compares portfolio returns to systematic risk. Find out the components, formula, examples, criticisms, and enhancements of the Treynor Ratio.
