treynor ratio: What is treynor ratio
The Treynor Ratio, also known as the reward-to-volatility ratio, is a performance metric for determining how high the return return is for each unit of risk taken by the portfolio. In this sense, a return-to-return return is a higher return than a return on a risk-free investment. Although not really a risk-free investment, treasury bills are used to represent risk-free returns in the treasury ratio. The risk in the trainer ratio represents the systemic risk that is calculated by the beta of the portfolio. The beta measures the return trend of a portfolio to respond to changes in overall market returns.
Trainer Ratio is a risk / return measure that enables investors to adjust the return of a portfolio for systematic risk.
A higher trainer ratio means the portfolio is a more favorable investment.
The Trenor Ratio is similar to the Sharpe Ratio, although the Sharpe Ratio uses the standard deviation of the portfolio to adjust the portfolio return.
The trainer ratio was developed by American economist Jack Trainer, one of the inventors of the Capital Asset Pricing Model (CAPM).
What does the trainer ratio represent?
In short, the trainer ratio is a risk-adjusted measure of return based on systematic risk. Indicates how much an investment, such as a stock portfolio, returns for investment risk, such as a mutual fund or an exchange traded fund. If there is a negative beta for the portfolio, the ratio result makes no sense. Significantly higher ratio results are more desirable and mean that a more favorable investment is expected in the above portfolio. Since the Trenor Ratio is based on historical data, it is not necessary to show future performance and rely solely on investment decisions.
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