Whether you are estimating on the spot or checking a result somebody else gave you, the treynor ratio calculator is the quickest way to get from beginning portfolio value, ending portfolio value, portfolio’s beta (> 0) and risk-free rate to portfolio return and treynor ratio.
What Is the Treynor Ratio Calculator?
The treynor ratio calculator takes beginning portfolio value, ending portfolio value, portfolio's beta (> 0) and risk-free rate and turns them into portfolio return and treynor ratio.
It is the kind of calculation you would otherwise do on the back of an envelope: mechanical, repeatable and easy to get subtly wrong without noticing.
How the Treynor Ratio Figure Is Built
Each result is calculated from the ones before it, so the working is fully visible. That matters when the answer is going to be quoted to somebody else and you need to be able to explain where it came from.
The figures are exactly as good as the assumptions underneath them. Check the rates, the periods and the tax treatment before you rely on the result.
Reading the Result Sensibly
A small change in an input can move the result by much more than you would expect, particularly where the calculation divides by one of the figures you supplied. That is worth understanding before you rely on a figure.
For anything that will be committed to, write the inputs down beside the result. A number you can reproduce is worth far more than one you cannot explain.
A Worked Example
Working through an example, with beginning portfolio value set to 10, ending portfolio value set to 5, portfolio's beta (> 0) set to 2, the calculator returns portfolio return of -0.5, and treynor ratio of -50.25. Substitute your own figures and the same steps produce the same kind of answer.
Frequently Asked Questions
What do I need to work out portfolio return?
Enter beginning portfolio value, ending portfolio value, portfolio's beta (> 0) and risk-free rate. The calculator then works through the relationship and reports portfolio return and treynor ratio.
What does the treynor ratio actually calculate?
It takes beginning portfolio value, ending portfolio value, portfolio's beta (> 0) and risk-free rate and converts them into portfolio return and treynor ratio using the standard relationship for this problem. Each step is applied in turn, so every output is traceable back to the numbers you typed in.
How should I enter beginning portfolio value?
Use the value you actually have, in the unit shown next to the field. Enter every value in the same unit system. The calculator assumes the figures you supply are consistent, so it cannot correct a mistake that happens before the calculation starts.
Does anything you type get stored?
No. The whole calculation runs inside your browser, and nothing you enter is uploaded, logged or sent anywhere.
Why does a small change in one value move the answer so much?
That happens when an output depends on a ratio, because dividing by a small number magnifies any change in it. Check the units first, then check whether the value you entered is in the range the relationship was designed for.