Free Treynor Ratio Calculator
Treynor ratio measures return per unit of market risk, not total risk. The right metric when you're adding a strategy to an already-diversified portfolio. Upload a CSV and see Treynor alongside Sharpe, Sortino, and 70+ other metrics.
What Is the Treynor Ratio?
The Treynor ratio — sometimes called the reward-to-volatility ratio — measures a portfolio's excess return per unit of systematic (beta) risk. Jack Treynor introduced it in 1965, predating the Sharpe ratio by a year, with a crucial conceptual difference: Treynor divides by beta, Sharpe divides by total volatility.
Treynor = (Rportfolio − Rrisk-free) / βportfolio
Annualized excess return divided by portfolio beta
The two measures answer subtly different questions. Sharpe asks: "How much excess return did I get per unit of total volatility?" Treynor asks: "How much excess return did I get per unit of non-diversifiable volatility?"
The practical implication: if you're evaluating a sub-portfolio that will sit inside a broader diversified holding, diversifiable risk washes out and only systematic risk matters. In that context, Treynor is the correct metric. If you're evaluating a standalone portfolio, Sharpe is correct because total volatility still matters to you.
When Treynor Beats Sharpe (and Vice Versa)
| Situation | Better Metric | Why |
|---|---|---|
| Adding a strategy to a diversified portfolio | Treynor | Only systematic risk survives diversification; diversifiable risk is irrelevant at the margin |
| Standalone concentrated portfolio (5 stocks) | Sharpe | Idiosyncratic risk is real and unavoidable — penalize it |
| Comparing two hedge funds for your overall allocation | Treynor | The funds will be combined with other holdings |
| Evaluating your complete net-worth portfolio | Sharpe | Total volatility is what you actually feel |
| Cross-benchmark comparison (e.g., stock vs crypto portfolio) | Neither — use alpha | Different benchmarks yield non-comparable Sharpe and Treynor values |
| Near-zero-beta portfolio (market-neutral) | Sharpe | Treynor's denominator approaches zero and produces misleading results |
Foliolytic computes all three (Sharpe, Sortino, Treynor) side by side so you never need to choose in the abstract — you see them together and pick the one that fits your use case.
Rough Benchmarks for Treynor Ratio
| Treynor vs SPY | Interpretation |
|---|---|
| < 0 | Lost money relative to risk-free rate |
| 0 – 0.05 | Underperformed on a beta-adjusted basis |
| 0.05 – 0.10 | Market-like performance |
| 0.10 – 0.15 | Strong — meaningful outperformance per unit of market risk |
| 0.15 – 0.20 | Excellent |
| > 0.20 sustained | Exceptional, rare outside specialized strategies |
For crypto portfolios measured against BTC, Treynor values run smaller in absolute terms because crypto betas vs BTC are often above 1 and crypto betas vs SPY are frequently 2-3. Always compare Treynor within the same asset class and benchmark — not across.
See Your Portfolio's Treynor Ratio
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Open the AnalyzerFrequently Asked Questions
What is the Treynor ratio?
The Treynor ratio measures a portfolio's excess return per unit of systematic (beta) risk. Formula: Treynor = (R_portfolio − R_risk-free) / β. Unlike Sharpe, which divides by total volatility, Treynor divides only by the portion of risk that comes from market exposure. This makes it the cleaner metric when comparing portfolios that have different levels of market correlation.
Treynor vs Sharpe — when should I use each?
Use Sharpe for well-diversified portfolios or when evaluating a portfolio in isolation. Use Treynor when comparing portfolios that will be added to an existing well-diversified holding — because in that context, only systematic (beta) risk matters; diversifiable risk washes out. For a sub-portfolio or single strategy you're plugging into a bigger allocation, Treynor is the right metric. For your total portfolio, Sharpe is the right metric.
What is a good Treynor ratio?
Treynor ratios depend on the benchmark and time period. Rough guide for US equity portfolios over multi-year periods: below 0.05 is weak, 0.05-0.10 is market-like, 0.10-0.15 is strong, above 0.15 sustained is excellent. For crypto portfolios vs BTC, Treynor is typically smaller in absolute terms because crypto betas are often huge. Always compare Treynor within the same asset class and benchmark, never across.
What happens if my portfolio has zero or negative beta?
Treynor ratio breaks down with near-zero beta (division by near-zero produces absurdly large values) and becomes misleading with negative beta. In those cases, use Sharpe instead — Sharpe's denominator (total volatility) is always positive and well-behaved. Foliolytic automatically flags portfolios with beta below 0.2 and suggests Sharpe as the more reliable metric for that portfolio.
Does Treynor account for diversifiable risk?
No, and that's the point. Treynor assumes diversifiable (idiosyncratic) risk is already eliminated — either because the portfolio itself is diversified or because it's a component of a broader diversified holding. If you're evaluating a concentrated portfolio (say, 3 stocks), Treynor will flatter you by ignoring all the stock-specific risk you're carrying. Sharpe will correctly penalize it. For concentrated portfolios, Sharpe is the more honest metric.