The difference between the treenot ratio and the sharp ratio, you will use it after reading it!


In financial activities, investors want to maximize the expected return of investment, but the expected return and risk must coexist, and the expected return and risk are high. Therefore, the selection of financial products must take comprehensive consideration of the expected return and risk. However, it is not easy to find the balance between expected return and risk. Investors usually need to use certain tools, such as the Treynor ratio and the sharp ratio. What is the difference between the Treynor ratio and the sharp ratio?

The difference between the treynold ratio and the sharp ratio

1. The calculation formula is different

The treynold index is a measure of the excess expected return of unit risk, which is generally expressed by TP. The calculation formula is: T = (rp-rf) / β P.

Where T represents the Treynor performance index, RP represents the average expected return of the fund, RF represents the average risk-free interest rate, and β P represents the system risk.

Sharpe ratio takes the standard deviation of the expected return rate of the fund as the risk measurement index, and the calculation formula is: [e (RP) - RF] / σ P.

Where e (RP) represents the expected return rate of the portfolio, RF represents the risk-free interest rate, and σ P represents the standard deviation of the portfolio.

2. They are used in different ways

Investors judge whether the risk of fund managers in the process of fund management is beneficial to investors by using the treynold index. If the treynold index is high, the higher the unit risk premium, the risk is beneficial to investors. On the contrary, if the treynold index is small, it means that the risk is unfavorable to investors.

Because the Treynor index mainly considers the systematic risk, excluding the non systematic risk. Even if the fund manager disperses the risk through the investment portfolio, the system risk will not change, and it can not accurately reflect the management ability of the fund manager. Therefore, the treynold ratio is generally used to consider the investment performance of passive funds.

The sharp ratio considers the overall risk. When investors need to choose one of the funds, they usually take the sharp ratio as a reference.

The above contents about the difference between the treynold ratio and the sharp ratio, I hope to help you. Warm tips: financial management is risky and investment should be cautious.

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