# Treynor Ratio

*Risk & Portfolio — Finicade finance glossary*

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`

**Also known as:** Treynor measure, reward to volatility ratio

**Related terms:** [Sharpe Ratio](https://finicade.com/glossary/sharpe-ratio), [Beta](https://finicade.com/glossary/beta), [CAPM (Capital Asset Pricing Model)](https://finicade.com/glossary/capm), [Systematic Risk](https://finicade.com/glossary/systematic-risk), [Jensen's Alpha](https://finicade.com/glossary/jensen-s-alpha)

Source: https://finicade.com/glossary/treynor-ratio