Treynor Ratio

The Treynor Ratio differs from the Sharpe Ratio insofar as the beta to the Market Benchmark is used as a measure of risk rather than the standard deviation of the manager series.

    Treynor Ratio = (AnnRtn(r1, ..., rn) - AnnRtn(c1, ..., cn)) / (beta of manager to market)

where:

    r1, ..., rn = manager return series
    c1, ..., cn = cash equivalent return series

The Treynor Ratio is a risk-adjusted measure of return which uses beta to represent risk.

To view our quick tip video on the Treynor Ratio, click the following link: 
http://www.styleadvisor.com/sites/default/files/quick_tip_video/treynor_wmv_83737.wmv

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