How this calculator works
Treynor divides the portfolio risk premium by market beta. Use a positive beta; zero and negative betas do not support the usual ranking interpretation. Beginning and ending values can supply a simple return only when there are no deposits or withdrawals. Returns and the risk-free rate must cover the same period.
Formula
Treynor ratio = (portfolio return - risk-free return)/beta. Return = benchmark + ratio x risk. Risk = (return - benchmark)/ratio.
Worked example
A 14% portfolio return, 2% risk-free return and beta 1.2 give a Treynor ratio of 0.10. A 7% return, 2% risk-free rate and beta 0.5 also give 0.10.
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Frequently asked questions
Can this ratio be negative?
Yes. A negative excess return produces a negative ratio with a positive risk denominator.
What if the risk denominator is zero?
The ratio is undefined; a positive denominator is required.
Can I compare different return periods?
First express returns, benchmark and risk on a consistent basis. Annual and monthly inputs should not be mixed.