# Treynor Ratio Calculator

Introduction

Calculating the Treynor ratio is crucial for investors aiming to evaluate the risk-adjusted performance of their investments. This article presents a simple and efficient calculator to compute the Treynor ratio.

## How to Use

Simply input the required values into the calculator fields and click the “Calculate” button to obtain the Treynor ratio.

## Formula

The Treynor ratio is calculated as:

Where:

*Rp* = Portfolio return*Rf* = Risk-free rate of return*β*= Beta of the portfolio

## Example Solve

Let’s consider a portfolio with a return of 10%, a risk-free rate of 3%, and a beta of 1.2.

**FAQs**

**Q: What is the significance of the Treynor ratio?**

**A:** The Treynor ratio helps investors assess the risk-adjusted returns of their investment portfolios, providing insights into how efficiently the portfolio generates returns relative to its risk exposure.

**Q: How does the Treynor ratio differ from other performance metrics?**

**A:** Unlike the Sharpe ratio, which uses total risk, the Treynor ratio focuses solely on systematic risk (beta), making it particularly useful for evaluating investments within a diversified portfolio.

**Q: Is a higher Treynor ratio always better?**

**A:** Not necessarily. While a higher Treynor ratio indicates higher returns per unit of systematic risk, it’s essential to consider other factors such as investment objectives and risk tolerance.

## Conclusion

The Treynor ratio calculator simplifies the evaluation of investment performance by providing a clear measure of risk-adjusted returns. By understanding and utilizing this metric, investors can make informed decisions to optimize their portfolios.