Use our free Information Ratio Calculator to evaluate the risk-adjusted performance of an investment portfolio or fund manager. It measures excess return per unit of risk, comparing your portfolio's returns against a specific benchmark. Quickly assess how consistently a portfolio outperforms its benchmark, taking into account the volatility of those excess returns. This tool is vital for investors and analysts to gauge investment efficiency.
Formula:
The Information Ratio (IR) quantifies the risk-adjusted return of an investment portfolio or fund manager relative to a benchmark.
Information Ratio (IR) = (Rp - Rb) / TE
Where:
- Rp = Portfolio Return (Average)
- Rb = Benchmark Return (Average)
- TE = Tracking Error (Standard Deviation of Excess Returns, i.e., Standard Deviation of (Rp - Rb))