Treynor ratio: Understanding the Treynor Ratio’s Beta Denominator
The Treynor ratio relates excess return to market beta rather than total volatility. It answers a different question from the Sharpe ratio and depends on the market benchmark chosen.
Use the Treynor ratio Calculator to enter your own figures and compare the result with the worked example below.
Treynor ratio formula
Treynor = (Portfolio return − Risk-free rate) ÷ Portfolio beta
Worked example
| Item | Example value |
|---|---|
| Portfolio return | 10 % |
| Risk-free rate | 3 % |
| Portfolio beta | 1.2 beta |
| Treynor ratio | 5.833333 |
These are illustrative inputs, not current prices, rates or recommended targets. Where a currency is shown, keep all comparable money amounts in the same currency; conversion examples identify the two sides separately.
How to interpret the result
A beta near zero makes the ratio unstable. This tool expresses excess return in percentage-point units, so check conventions before comparing published ratios.
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Method and further reading
The example follows the FinMathly calculator method. For broader background, see Investor.gov: Introduction to investing. The background resource may use jurisdiction-specific terms; it does not replace the assumptions of this calculator.
Featured photograph: Pexels.