# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Treynor Ratio

Similar to the Sharpe Ratio, Treynor Ratio is a measurement of efficiency utilizing the relationship between annualized risk-adjusted return and risk. Unlike Sharpe Ratio, Treynor Ratio utilizes "market" risk (beta) instead of total risk (standard deviation). Good performance efficiency is measured by a high ratio.

Developed by Jack Treynor, the Treynor ratio (also known as the "reward-to-volatility ratio") attempts 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's 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.

Click here to read more about the Treynor ratio.

Sponsors Center
Sponsored Links