Return per unit beta.

Treynor ratio measures return per unit of systematic (market) risk. Treynor = (portfolio return - baseline rate) / portfolio beta. 12% return, 4% baseline, beta 1.5: Treynor = (12-4)/1.5 = 5.33. Higher = better return per unit market risk taken.

Example: portfolio returns 12% annually, baseline 4%, beta 1.5. Treynor = 5.33. Means earning 5.33% excess return per unit of beta. Compare against benchmark Treynor (typically 5-7% for S&P 500 historically). Above benchmark: outperforming on systematic-risk-adjusted basis. Below: market is rewarding you better.

Treynor vs Sharpe: Sharpe uses total volatility (denominator: standard deviation). Treynor uses systematic risk only (denominator: beta). Treynor better for diversified portfolios where idiosyncratic risk diversified away - only systematic risk remains. Sharpe better for concentrated portfolios. Most institutional analysis uses both - they answer slightly different questions.

Run it with sensible defaults

Using portfolio annual return of 12%, baseline rate of 4%, portfolio beta of 1.5, the calculation works out to 5.33. Nudge the inputs toward your own situation and the output recalculates instantly. The defaults are meant as a starting point, not a recommendation.

The levers in this calculation

The inputs — Portfolio Annual Return %, Baseline Rate %, and Portfolio Beta — do not pull with equal force. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

How the math works

Treynor = (portfolio return - baseline rate) / portfolio beta. The working is transparent — you can verify every step yourself in the formula section below. No black box, no opaque "proprietary model".

Where this fits in planning

This is a "what-if" tool, not a forecast. Use it to test ideas before committing: what happens if the rate is 2% lower than hoped, what happens if you add five more years. The value is in the scenarios you run, not the single answer you get from the defaults.

What this doesn't capture

Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. Treat the number as one scenario, not a forecast.