Information Ratio Calculator - Portfolio Performance
Measure risk-adjusted active portfolio performance with portfolio returns, benchmark returns, active return, tracking error, and information ratio.
Enter overall portfolio and benchmark returns plus matching period return series to calculate active return, tracking error, and the information ratio.
Information Ratio Calculator - Portfolio Performance
Measure risk-adjusted active portfolio performance with portfolio returns, benchmark returns, active return, tracking error, and information ratio.
Information Ratio Results
Information Ratio
0.00
Active Return
0.00%
Tracking Error
0.00%
Average Active Return
0.00%
Information ratio = (portfolio return − benchmark return) / tracking error, where tracking error is the population standard deviation of period active returns; if tracking error is 0 the ratio is shown as 0.
About the Information Ratio Calculator
The information ratio asks whether active return was worth the extra volatility versus a benchmark. A manager who beats an index by 2% with almost no tracking error looks different from one who beats it by 2% with wild residual swings. The information ratio calculator uses the overall portfolio and benchmark returns in the numerator and the population standard deviation of period-by-period active returns as tracking error in the denominator.
Active return is (portfolio return − benchmark return), entered as annual percentages. Period series are comma-separated percentage points, such as monthly or quarterly returns. Tracking error is the population standard deviation of (portfolio period − benchmark period). Information ratio = overall active return ÷ tracking error, with both sides interpreted in percent. If every period active return is identical, tracking error is zero and the ratio is reported as 0 rather than infinity.
A 12% portfolio versus a 10% benchmark with period returns 3, 1, 4, 2 against 1, 1, 2, 1 produces about 2.41 of information ratio, 2.00% active return, and 0.83% tracking error. Constant 1-point outperformance each period cannot be scored this way because there is no residual dispersion. That is a reminder to use a series long enough to show how the excess return actually varied.
Practitioners often annualize tracking error from monthly data by multiplying by √12; this worksheet does not annualize. Sample versus population standard deviation also differs. Do not compare an IR built from three months with one built from five years. Use the information ratio beside tracking error, not instead of it, when judging whether active risk was compensated.
Asset owners should store the benchmark name and the series frequency with every information ratio. An IR versus a cash benchmark is not comparable with an IR versus a sector index. The information ratio calculator will faithfully divide whatever active return you enter by whatever residual dispersion you paste, including garbage in, garbage out. Prefer a full market cycle, drop stale stubs, and do not cherry-pick a quiet quarter to make tracking error vanish.
Information Ratio Examples
IR uses overall active return divided by the population standard deviation of period active returns.
| Inputs | Information ratio | Notes |
|---|---|---|
| Portfolio 12%, benchmark 10%, series 3,1,4,2 versus 1,1,2,1 | 2.41 | Active return is 2.00% and tracking error is 0.83%. |
| Portfolio 11%, benchmark 9%, series 5,4,6,3,7 versus 4,5,4,3,5 | 1.71 | A noisier residual series lowers IR even though active return is still 2%. |
| Portfolio 8%, benchmark 10%, series 1,0,2 versus 3,1,4 | -4.24 | Negative IR means the portfolio lagged the benchmark relative to its tracking error. |
How to Calculate an Information Ratio
- Enter the overall portfolio return and benchmark return for the same horizon, in percent.
- Paste matching comma-separated period returns for the portfolio and the benchmark.
- Select Calculate to view information ratio, active return, tracking error, and mean period active return.
- If IR shows 0.00, check whether every period beat the benchmark by the same amount.
- Compare IR across managers only when the series frequency and length are similar.
Information Ratio Calculator FAQ
How is tracking error measured here?
It is the population standard deviation of period active returns (portfolio minus benchmark each period). It is not an annualized monthly tracking error unless your series is already in annual units.
Why can the information ratio be zero even if the portfolio beat the index?
If every period active return is the same, tracking error is zero and the calculator reports IR as 0 instead of dividing by zero. Use a longer or more variable series.
Should the period series be monthly or annual?
Use one consistent frequency and keep the overall returns on a comparable scale. Mixing annual totals with monthly residuals inflates or deflates IR.
Is this the same as the Sharpe ratio?
No. Sharpe uses excess return over a risk-free rate divided by total volatility. Information ratio uses excess return over a benchmark divided by tracking error.
What is a good information ratio?
Context matters, but many allocator scorecards treat IR above 0.5 as respectable and above 1.0 as strong for a given constraint set. Always read it with tracking error and the length of the sample.