# Information Ratio Calculator

URL: https://speedycalculator.com/calculators/finance/information-ratio/
Last updated: 2026-10-25

> The information ratio calculator measures a portfolio manager's skill: the portfolio's excess return over its benchmark divided by the tracking error (the volatility of that excess return).

## Inputs

- Beginning portfolio value
- Ending portfolio value
- Benchmark return (%)
- Tracking error (%)

## Results

- Portfolio return
- Excess (active) return
- Information ratio

## Formula

```
Portfolio return = (ending value − beginning value) ÷ beginning value
Information ratio = (portfolio return − benchmark return) ÷ tracking error
```

## Explanation

The information ratio shows how consistently a manager beats the benchmark. An IR of 0.5 is good, 0.75 very good and above 1 exceptional – few managers sustain that over many years.

### How to use the Information Ratio Calculator

- **Beginning portfolio value**
- **Ending portfolio value**
- **Benchmark return**
- **Tracking error**

Results update as you type, and every field accepts the units shown in its menu.

### How it works

Enter the beginning and ending portfolio values, the benchmark's return and the tracking error.

### Tips

- Use the nominal annual rate and pick the compounding frequency your bank or broker states.
- Small differences in return or fees compound into large differences over decades.
- Run the calculation with a cautious, a central and an optimistic return to see the range of outcomes.
- Past returns do not guarantee future returns – nothing here is investment advice.

### Common mistakes to avoid

- Comparing an APR with an APY or effective rate.
- Ignoring inflation, taxes and fees when judging a real return.
- Entering a percentage as a decimal (5 instead of 0.05 is correct here).

### Inputs explained

FieldWhat to enterBeginning portfolio valueAmount in your currencyEnding portfolio valueAmount in your currencyBenchmark returnIn %Tracking errorIn %

### What each result means

- **Portfolio return** = ([Ending portfolio value]÷[Beginning portfolio value] - 1)×100
- **Excess (active) return** = [Portfolio return] - [Benchmark return]
- **Information ratio** = [Excess (active) return]÷[Tracking error]

### Example values

How the main result changes when **Beginning portfolio value** changes and everything else stays at the example values above:

Beginning portfolio valueInformation ratio50,00028.7575,00010.083100,0000.75125,000-4.85150,000-8.583200,000-13.25

## Worked example

Inputs — Beginning portfolio value: $100,000; Ending portfolio value: $112,000; Benchmark return: 9 %; Tracking error: 4 %.

Results — Portfolio return = 12 %; Excess (active) return = 3 %; **Information ratio = 0.75**.

## FAQ

**What is a good information ratio?**
Around 0.5 is good, above 1 is exceptional.

**What is tracking error?**
The standard deviation of the difference between portfolio and benchmark returns.

**How is it different from the Sharpe ratio?**
Sharpe uses the risk-free rate; IR uses a benchmark.

**What formula does the Information Ratio Calculator use?**
Portfolio return = (ending value − beginning value) ÷ beginning value.


## Sources

- [Corporate Finance Institute – financial ratios](https://corporatefinanceinstitute.com/)