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.

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## 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%