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# Treynor Ratio

AnalyticsTrade Team Last updated on 26 Apr 2023

# Treynor Ratio

The Treynor Ratio is a measure of a portfolio’s risk-adjusted performance. It is calculated by dividing the portfolio’s excess return over the risk-free rate by its beta. The Treynor Ratio is a measure of the portfolio’s return per unit of systematic risk, or market risk. It is a measure of the portfolio’s ability to generate returns in excess of the risk-free rate, given the amount of systematic risk taken.

## History of the Treynor Ratio

The Treynor Ratio was developed by Jack Treynor in 1965. Treynor was a professor at the University of California, Los Angeles, and a pioneer in the field of portfolio theory. He developed the Treynor Ratio as a way to measure the performance of a portfolio relative to its risk. The Treynor Ratio is a measure of the portfolio’s return per unit of systematic risk, or market risk. It is a measure of the portfolio’s ability to generate returns in excess of the risk-free rate, given the amount of systematic risk taken.

## Table of Comparisons

Portfolio Excess Return Risk-Free Rate Beta Treynor Ratio
Portfolio A 10% 2% 1.2 7.5%
Portfolio B 12% 2% 1.5 8%

## Summary

The Treynor Ratio is a measure of a portfolio’s risk-adjusted performance. It is calculated by dividing the portfolio’s excess return over the risk-free rate by its beta. The Treynor Ratio is a measure of the portfolio’s return per unit of systematic risk, or market risk. It is a measure of the portfolio’s ability to generate returns in excess of the risk-free rate, given the amount of systematic risk taken. For more information about the Treynor Ratio, you can visit Investopedia, The Balance, and Morningstar.

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