Treynor Ratio

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The Treynor is the reward-to-volatility ratio that expresses the excess return to the beta of the equity or portfolio. It is similar to the Sharpe ratio, but instead of using volatility in the denominator, it uses the beta of equity or portfolio. Therefore, the Treynor Ratio is calculated as [(Portfolio return - Risk-free return)/Beta].The Treynor Ratio Technical Analysis lookup allows you to check this and other technical indicators across multiple equities. You can select from a set of available technical indicators by clicking on the link to the right. Please note, not all equities are covered by this module due to inconsistencies in global equity categorizations and data normalization technicques. Please check also Equity Screeners to view more equity screening tools
  
The Treynor is the reward-to-volatility ratio that expresses the excess return to the beta of the equity or portfolio. It is similar to the Sharpe ratio, but instead of using volatility in the denominator, it uses the beta of equity or portfolio. Therefore, the Treynor Ratio is calculated as [(Portfolio return - Risk-free return)/Beta].

Treynor Ratio

 = 

ER[a] - RFR

BETA

This ratio was developed by Jack Treynor to measure how well an investment has compensated its investors given its level of risk. The Treynor ratio relies on beta, which measures an investment sensitivity to market movements, to gauge risk. The premise underlying the Treynor ratio is that systematic risk--the kind of risk that is inherent to the entire market (represented by beta)--should be penalized because it cannot be diversified away.
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Treynor Ratio In A Nutshell

Using the Treynor ratio is essentially measuring the returns of your investment minus what you may have earned in an environment where there was minimal to no risk. This is important because you can measure how much of a premium your equity may be trading at or a discount. Not only that, but you can being to measure the amount of risk you are taking for the return on investment you are getting.

There are many ratios out there that measure anything from risk to cash flow, but the Treynor ratio is around to help traders and investors measure risk to reward.

Closer Look at Treynor Ratio

If you have yet to understand risk, begin looking at other risk measurements such as risk adjusted performance and understand what the risk free rate of return is. Ratios us as this are meant to help you mitigate risk and continue to bring in underprice equities. The goal of any portfolio is to increase risk while keeping a stable risk level.

Risk is one of the most important aspects of investing and finance and should be monitored with care. Using this ratio can also help you compared equities apples to apples, letting you understand which investments may be offering better value than others. When implementing this you should doodle on the side until you fully understand how to use this ratio. After that, feel free to implement this as you wish and begin exploring the world of risk. If you get stuck, reach out to an investing professional and they can help to point you in the right direction.

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Risk Adjusted Performance
Market Risk Adjusted Performance
Mean Deviation
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Downside Deviation
Coefficient Of Variation
Standard Deviation
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Information Ratio
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Sortino Ratio
Treynor Ratio
Maximum Drawdown
Value At Risk
Potential Upside
Downside Variance
Semi Variance
Expected Short fall
Skewness
Kurtosis
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