Treynor Ratio Calculator — Risk-Adjusted Return
The Treynor ratio measures how much excess return a portfolio earns for each unit of market risk (beta) it takes on. It is the go-to metric for comparing diversified portfolios where only systematic risk is relevant.
%
%
Excess return per unit of market (systematic) risk — higher is better
- 1
Excess return (Rp − Rf)
12% − 4.5% = 7.5%The portion of the portfolio return that exceeds the risk-free rate. - 2
Treynor ratio
7.5 ÷ 1.2 = 6.2500
How does this calculator work?
Treynor ratio = (Portfolio return − Risk-free rate) ÷ Beta. It measures excess return per unit of market risk. A ratio above the market's own Treynor ratio (market excess return ÷ 1) indicates risk-adjusted outperformance. Useful only for diversified portfolios where systematic risk dominates.
Formula
How this is calculated
Developed by Jack Treynor in 1965, the Treynor ratio is a risk-adjusted performance measure that divides a portfolio's excess return (return above the risk-free rate) by its beta — a measure of the portfolio's sensitivity to broad market movements. A higher Treynor ratio means the portfolio generated more return per unit of systematic risk, which is desirable.
Beta quantifies only systematic (market-wide) risk — the risk that cannot be eliminated through diversification. This makes the Treynor ratio most meaningful when comparing well-diversified portfolios where unsystematic (company-specific) risk has been diversified away. For concentrated or single-asset portfolios, the Sharpe ratio (which uses total standard deviation) is generally more appropriate.
The Treynor ratio has no absolute "good" benchmark — it must be compared against a reference: the market benchmark itself has a Treynor ratio equal to the market excess return (since its beta is 1.0). A portfolio with a higher Treynor ratio than the benchmark outperformed on a systematic-risk-adjusted basis. The chart plots the Security Market Line (SML) — the expected return for any given beta given the computed Treynor ratio as the slope — and marks the portfolio's position.
Frequently asked questions
There is no universal threshold — the ratio must be compared against a benchmark or other portfolios. If the market returned 10% and the risk-free rate is 4%, the market's Treynor ratio is (10 − 4) ÷ 1.0 = 6. A portfolio with a Treynor ratio above 6 outperformed on systematic-risk-adjusted terms; below 6, it underperformed relative to passive market exposure.
The Sharpe ratio uses total standard deviation as the risk denominator, capturing both systematic and unsystematic risk. The Treynor ratio uses beta, which captures only systematic (market) risk. For a fully diversified portfolio, both should give consistent rankings. For concentrated portfolios, the Sharpe ratio is more complete because it penalises undiversified risk that beta ignores.
Beta should be estimated against the same benchmark used to judge the portfolio, over the same measurement period as the returns. Common sources: Bloomberg, Morningstar, or regression of portfolio returns against benchmark returns over at least 36 months of monthly data. A beta of 1.0 means the portfolio moves in line with the market; >1 amplifies market moves; <1 dampens them; negative beta moves opposite to the market.
Also known as
TG we-Calculate Editorial Team. (2026). Treynor Ratio Calculator — Risk-Adjusted Return [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/treynor-ratio-calculator
TG we-Calculate Editorial Team. "Treynor Ratio Calculator — Risk-Adjusted Return." TG we-Calculate. 2026. https://we-calculate.com/calculator/treynor-ratio-calculator.
TG we-Calculate Editorial Team, "Treynor Ratio Calculator — Risk-Adjusted Return," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/treynor-ratio-calculator
@misc{wecalculate_treynor_ratio_calculator, title = {Treynor Ratio Calculator — Risk-Adjusted Return}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/treynor-ratio-calculator}}, year = {2026}, note = {TG we-Calculate} }
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