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}

asset return
asset expected return
risk free rate of return
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