Treynor ratio in mutual fund performance

Mon, 18 May 2026 00:00:00 +0000

The Treynor ratio is a risk-adjusted return measure that computes excess return per unit of systematic risk (beta) , rather than total volatility as in the Sharpe ratio . The Treynor ratio is most meaningful for well-diversified portfolios where unsystematic risk is largely diversified away.

Formula

Treynor ratio = (Scheme return - Risk-free return) / Portfolio beta

Where:

Portfolio beta: The scheme’s systematic risk relative to the market benchmark.

Interpretation

Higher Treynor ratio = better risk-adjusted return per unit of systematic risk.

Treynor ratio in mutual funds

Tue, 12 May 2026 00:00:00 +0000

The Treynor ratio (also called the reward-to-volatility ratio or Treynor measure) is a risk-adjusted performance measure that divides a fund’s excess return (return above the risk-free rate) by its beta , a measure of systematic market risk, rather than by total standard deviation as in the Sharpe ratio . Developed by Jack Treynor in 1965, it is based on the Capital Asset Pricing Model (CAPM) framework and is appropriate when the mutual fund is evaluated as a component within a larger, well-diversified portfolio.

Treynor Ratio on WebNotes

Treynor ratio in mutual fund performance

Formula

Interpretation

Treynor ratio in mutual funds