Treynor, Calmar & Information Ratio Calculator (Risk-Adjusted Return)

How it works

Sharpe = (Rp − Rf) ÷ σp · Treynor = (Rp − Rf) ÷ β · Calmar = CAGR ÷ |max drawdown| · information ratio = (Rp − Rb) ÷ tracking error · Sortino = (Rp − Rf) ÷ downside deviation · alpha = Rp − [Rf + β(Rb − Rf)] · M² = Rf + Sharpe × σ_benchmark

Return alone says nothing about how it was earned, so each risk-adjusted ratio divides the return by a different notion of risk suited to a different question: Sharpe uses total volatility for an investment held on its own, Treynor uses beta for one held inside a diversified portfolio where only market risk survives, the information ratio uses tracking error to judge an active manager against a benchmark, and Calmar uses the maximum drawdown that investors actually feel. Alpha and M² translate the same ideas into percentage points, which are easier to argue about than ratios, and all of them are period-dependent — compare like windows, and remember that a few good years prove little.

Worked example

A fund returning 11.5% with 14% volatility, a beta of 0.85, 4.5% tracking error and a 22% maximum drawdown against a benchmark at 9.8% (15.5% volatility) and a 4.2% risk-free rate: Sharpe 0.52 vs the benchmark's 0.36, Treynor 8.6% vs 5.6%, Calmar 0.52, information ratio 0.38 and alpha of about 2.5% a year; its M² of 12.3% says it would have beaten the benchmark by 2.5 points at equal risk — but an IR of 0.38 needs roughly 28 years to prove it is skill.

Frequently asked questions