Treynor Ratio
Also called: Treynor measure, reward to volatility ratio
The Treynor ratio measures excess return per unit of beta, rather than per unit of total volatility as Sharpe does. The choice of denominator encodes an assumption: Treynor is the right measure for one sleeve of an already-diversified portfolio, where only systematic risk should be compensated, while Sharpe suits a standalone portfolio holding all your money.
Formula
Treynor ratio = (Portfolio return − Risk-free rate) ÷ Beta
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