Treynor Ratio Calculator

Measure portfolio excess return per unit of systematic beta risk.

Enter portfolio return, the risk-free rate, and portfolio beta to compute the Treynor ratio.

Measure portfolio excess return per unit of systematic beta risk.

Portfolio Return (%)

Risk-Free Rate (%)

Portfolio Beta

About the Treynor Ratio

The Treynor ratio measures how much excess return a portfolio earned for each unit of systematic risk. Unlike the Sharpe ratio, which divides by total volatility, Treynor divides by beta, so it is most useful when the portfolio is well diversified and idiosyncratic noise is not the main concern. The Treynor ratio calculator subtracts the risk-free rate from the portfolio return and divides that excess return by portfolio beta. Enter returns as percentages in the same period, such as annual figures. With a 12% portfolio return, a 4% risk-free rate, and beta of 1.00, the ratio is (12 − 4) ÷ 1.00 = 8.00. A more aggressive book that returns 15% with a 3% risk-free rate and beta of 1.20 scores (15 − 3) ÷ 1.20 = 10.00. A defensive sleeve that returns 8% with a 5% cash rate and beta of 0.80 scores (8 − 5) ÷ 0.80 = 3.75. Higher values mean more compensation per unit of market risk, provided the beta estimate is reliable. Portfolio managers use Treynor to rank funds, overlay strategies, and internal sleeves against a common market factor. A high ratio can reflect skill, cheap beta, or a lucky stretch of market timing. A low or negative ratio can reflect high beta without matching excess return, or a stretch when cash yields rose faster than risky assets. Compare only results that share the same return horizon and the same market index used to estimate beta. Beta must not be zero; a zero or tiny beta makes the ratio explode and usually means the factor model is a poor fit. Use a Treasury yield that matches the return period rather than mixing a monthly fund return with an annual T-bill rate. Historical beta from a short window can swing the denominator more than the numerator. The calculator reports the arithmetic only. It is not a forecast, a rating, or advice to buy or sell a fund. Recalculate when you roll the return window or when you replace a noisy beta with a more stable estimate from a longer sample.

Treynor Ratio Worked Examples

Each example uses (portfolio return − risk-free rate) ÷ beta, with returns in percent.

Inputs	Result	Interpretation
12% portfolio return, 4% risk-free rate, beta 1.00	8	The fund earned 8 percentage points of excess return per unit of market beta.
15% portfolio return, 3% risk-free rate, beta 1.20	10	Higher excess return more than offsets the higher beta.
8% portfolio return, 5% risk-free rate, beta 0.80	3.75	A low-beta sleeve still needs enough excess return to look attractive on Treynor.

How to Calculate the Treynor Ratio

Enter the portfolio return for the period as a percent.
Enter the matching risk-free rate as a percent.
Enter portfolio beta versus the market index you use for systematic risk.
Select Calculate and compare the ratio only with peers that share the same horizon and index.

Treynor Ratio Calculator FAQ

How is the Treynor ratio different from the Sharpe ratio?

Sharpe divides excess return by total standard deviation. Treynor divides by beta, so it ignores idiosyncratic volatility and is better suited to diversified portfolios.

Should I enter returns as decimals or percents?

Enter percents, such as 12 for 12%. Because the ratio is excess return divided by beta, mixing a decimal 0.12 with a percent 4 will distort the result.

What if portfolio beta is negative?

A negative beta is allowed mathematically and can appear in inverse or hedging books. Interpret the sign carefully: negative excess return over negative beta can produce a positive ratio that does not mean the strategy added value.

Which risk-free rate should I use?

Use a Treasury yield whose maturity matches the return period, such as a three-month bill for quarterly returns. Mismatched horizons make funds look better or worse than they are.

Is a higher Treynor ratio always better?

Higher is better only among comparable, diversified portfolios with trustworthy betas. A huge ratio driven by a near-zero beta is usually a measurement problem, not superior skill.