Treynor Ratio Calculator
Return per unit beta.
Calculate Treynor ratio measuring return per unit of market beta risk. Enter portfolio annual return to see treynor ratio: excess return per unit of beta.
What this tool does
Treynor ratio measures excess return per unit of beta — the return above the baseline rate divided by portfolio beta. This calculator takes your portfolio's annual return, baseline rate, and beta coefficient to compute the Treynor ratio, allowing you to see how much return your portfolio generates for each unit of systematic risk it carries. The result illustrates the portfolio's risk-adjusted performance relative to market risk alone. Portfolio return and beta are the primary drivers of the ratio; higher returns or lower beta both increase the figure. A typical use case compares two portfolios with different risk profiles to understand which generates more return per unit of systematic risk exposure. The calculator assumes beta accurately reflects the portfolio's market sensitivity and does not account for unsystematic risk, transaction costs, or tax effects. Results are for educational illustration only.
Quick answer: with the default values, the result is 5.33 (Treynor Ratio). Adjust the values below for your own figures.
Enter Values
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Formula Used
Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
Treynor ratio measures return per unit of systematic (market) risk. Treynor = (portfolio return - baseline rate) / portfolio beta. 12% return, 4% baseline, beta 1.5: Treynor = (12-4)/1.5 = 5.33. Higher = better return per unit market risk taken.
Example: portfolio returns 12% annually, baseline 4%, beta 1.5. Treynor = 5.33. Means earning 5.33% excess return per unit of beta. Compare against a broad market index's Treynor (typically 5-7% historically). Above benchmark: outperforming on systematic-risk-adjusted basis. Below: market is rewarding you better.
Treynor vs Sharpe: Sharpe uses total volatility (denominator: standard deviation). Treynor uses systematic risk only (denominator: beta). Treynor better for diversified portfolios where idiosyncratic risk diversified away - only systematic risk remains. Sharpe better for concentrated portfolios. Most institutional analysis uses both - they answer slightly different questions.
Run it with sensible defaults
Using portfolio annual return of 12%, baseline rate of 4%, portfolio beta of 1.5, the calculation works out to 5.33. The defaults are meant as a starting point, not a recommendation.
The levers in this calculation
The inputs — Portfolio Annual Return %, Baseline Rate %, and Portfolio Beta — do not pull with equal force. Not every input has equal weight. Adjusting one input at a time toward extreme values shows which ones move the result most.
How the math works
Treynor = (portfolio return - baseline rate) / portfolio beta.
Where this fits in planning
This is a "what-if" tool, not a forecast. It helps to test ideas: what happens if the portfolio return comes in 2% lower than hoped, or if beta is higher than estimated. The value is in the scenarios you run, not the single answer you get from the defaults.
What this doesn't capture
This is a simplified model that holds its assumptions constant. Real outcomes vary with market conditions, costs, taxes, and timing, so the figure is best read as one scenario rather than a forecast.
(12% - 4%) / 1.5 beta = 5.33.
Inputs
| Excess Return | 8.00% |
|---|---|
| Portfolio Beta | 1.50 |
| Portfolio Return | 12.00% |
| Baseline Rate | 4.00% |
| Rating | Good |
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
The calculator computes the Treynor ratio by subtracting the baseline rate from the portfolio's annual return, then dividing the result by the portfolio's beta. This measures the return earned per unit of systematic risk taken. The model assumes a constant annual return and beta over the measurement period, and treats the baseline rate as a fixed reference point. It does not account for unsystematic risk, portfolio fees, tax effects, or changes in beta over time. The ratio is most meaningful when comparing portfolios with similar asset classes or investment objectives, as beta estimates themselves vary depending on the reference market index and historical period chosen.
References
Frequently Asked Questions
Treynor vs Sharpe?
Good Treynor values?
Negative beta strategies?
Where to find beta?
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