Beta: What's the Difference? What's the Difference Between an Investment’s Sharpe Ratio and its Treynor Ratio? Both ratios exist to try and quantify the risk-adjusted return of an investment.

These five performance ratios, which measure risk-adjusted return, will help you rate how good your portfolio manager is at increasing the value of your portfolio.

For example, imagine a portfolio with an annual return of 9%, a risk-free rate of 3% and a beta of 1.2. The Treynor ratio would be calculated as follows: Treynor ratio = (9 – 3) / 1.2 = 0.5 ...

IR helps you understand if the returns are worth the risk. Other metrics like Beta and Sharpe ratio focus on different aspects of performance. But IR combines both risk and return to give a ...