Treynor Index
Definition
A measure of a portfolio's excess return per unit of risk, equal to the portfolio's rate of return minus the risk-free rate of return, divided by the portfolio's beta. This is a similar ratio to the Sharpe ratio, except that the portfolio's beta is considered the measure of risk as opposed to the variance of portfolio returns. This is useful for assessing the excess return from each unit of systematic risk, enabling investors to evaluate how structuring the portfolio to different levels of systematic risk will affect returns.
Use Treynor Index in a sentence
“ The Treynor Index was used to determine if our portfolio was performing well or if it carried to much risk. ”
“ You should try and figure out where you stand with the treynor index and decide what the best way to proceed is. ”
“ The treynor index was next to impossible for me to figure out so I had our accounting team take care of it for us. ”
