Enter the percentage return of the portfolio, the beta of the portfolio, and the risk-free return into the calculator to determine the Treynor ratio.

Treynor Ratio Formula

The following formula is used to calculate a Treynor Ratio:

TR = (PR – RFR) / B

  • Where TR is the Treynor ratio
  • PR is the portfolio return (%)
  • RFR is the risk free return (%)
  • B is the portfolio beta

What is the Treynor ratio?

A Treynor ratio is a measure of the excess return a given portfolio achieved per unit of risk taken by the portfolio.

In other words, the Treynor ratio is the reward-to-volatility ratio. The risk in the case of this formula is determined by the beta of the portfolio. Determining the beta can be explored with the calculator linked above.

How to calculate Treynor ratio?

The following example outlines the information and steps needed to calculate a Treynor ratio.

First, determine the total percentage return of the portfolio. For this example, the portfolio has returned 12%.

Next, determine the return of a risk-free asset. For this example, we will use a risk-free rate of 2%.

Next, determine the beta. The beta for this particular portfolio is measured to be 1.36.

Finally, calculate the Treynor ratio using the formula above:

TR = (PR – RFR) / B

TR = (12 – 2) / 1.36

TR = 7.35%