Term Glossary

Metrics, Models & Concepts

Treynor Ratio


Treynor ratio attempts to measure return on investment per unit or market risk expressed by the asset beta: \begin{equation} TR = \frac{E(r)-r_f}{\beta} \end{equation}

\(r\)
asset return
\(E(r)\)
asset expected return
\(r_f\)
risk free rate of return
\(\beta\)
market beta of asset returns

An intraday version of the ratio could be reduced further to: \begin{equation} TR_{intraday} = \frac{E(r)}{\beta} \end{equation} The key premise behind the Treynor ratio is that market (systematic) risk represented by beta, could not be diversified away and should be penalized.


Function Reference
portfolio_treynorRatio, position_treynorRatio