The Treynor ratio is useful for well-diversified portfolios, where beta captures most of the risk. Comparing it with the market’s Treynor ratio (market return − risk-free rate) shows whether the portfolio beat the market on a risk-adjusted basis.
How to use the Treynor Ratio Calculator
- Beginning portfolio value
- Ending portfolio value
- Risk-free rate
- Portfolio beta
- Market return (for comparison)
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 risk-free rate and the portfolio’s beta.
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
| Field | What to enter |
|---|---|
| Beginning portfolio value | Amount in your currency |
| Ending portfolio value | Amount in your currency |
| Risk-free rate | In % |
| Portfolio beta | A number |
| Market return (for comparison) | In % |
What each result means
- Portfolio return = ([Ending portfolio value]÷[Beginning portfolio value] – 1)×100
- Treynor ratio = ([Portfolio return] – [Risk-free rate])÷[Portfolio beta]
- Market Treynor ratio = [Market return (for comparison)] – [Risk-free rate]
Example values
How the main result changes when Beginning portfolio value changes and everything else stays at the example values above:
| Beginning portfolio value | Treynor ratio |
|---|---|
| 50,000 | 100 |
| 75,000 | 37.778 |
| 100,000 | 6.667 |
| 125,000 | -12 |
| 150,000 | -24.444 |
| 200,000 | -40 |
Formula
Portfolio return = (ending − beginning) ÷ beginningTreynor ratio = (portfolio return − risk-free rate) ÷ betaWorked example
Inputs — Beginning portfolio value: $100,000; Ending portfolio value: $112,000; Risk-free rate: 4 %; Portfolio beta: 1.2; Market return (for comparison): 10 %.
Results — Portfolio return = 12 %; Treynor ratio = 6.667; Market Treynor ratio = 6.
Frequently asked questions
What is the Treynor ratio?
Excess return per unit of beta.
How is it different from the Sharpe ratio?
Sharpe uses total volatility; Treynor uses only market risk.
When is Treynor most useful?
For diversified portfolios where specific risk has been diversified away.
What formula does the Treynor Ratio Calculator use?
Portfolio return = (ending − beginning) ÷ beginning.