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Treynor Ratio

Treynor Ratio

Treynor Ratio Definition

treynor ratioSometimes referred to the in the hedge fund industry as the return vs. volatility ratio the Treynor Ratio is a measure of the excess return per unit or risk, where the excess return is defined as the difference between the portfolio's return and the risk-free rate of return over the same period.

Definition Courtesy of HedgeCo

Treynor Ratio Calculation:

(Average Portfolio Return - Average Risk Return of Risk Free Instrument ) / Beta of the Portfolio

Here is a white paper on the Treynor Ratio.

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