BacktestFolio · Glossary
Treynor
In plain language
Like the Sharpe, but divides by Beta instead of volatility: useful for comparing well-diversified portfolios where idiosyncratic risk is already eliminated. A high Treynor means you earn a lot for every unit of market exposure.
Technical definition
Ratio of excess return over the risk-free rate to the portfolio's Beta. Unlike the Sharpe ratio (which uses total volatility), it uses only systematic (non-diversifiable) risk, assuming idiosyncratic risk has been eliminated through diversification.