Treynor Ratio

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Definition

The Treynor Ratio measures how much an investment returned given the amount of risk the investment assumed. A higher Treynor Ratio indicates that the portfolio is an advisable investment.

The Treynor ratio is named after Jack Treynor.

Formula

Treynor Ratio = (Average Annualized Total Monthly Returns - Risk Free Return Rate) / (Beta)

Note: We use the 1 month treasury rate as the risk free return rate.

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