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Information Ratio Calculator

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✖Portfolio Return refers to the gain or loss realized by an investment portfolio containing several types of investments.ⓘ Portfolio Return [R _p]			+10% -10%
✖Benchmark Return refers to the return achieved by a designated benchmark index over a specific period of time.ⓘ Benchmark Return [BR]			+10% -10%
✖Tracking Error is a measure of how closely a portfolio follows the index it is benchmarked against.ⓘ Tracking Error [TE]			+10% -10%

✖Information Ratio is a measure of the excess return of an investment relative to a benchmark, adjusted for the volatility of those excess returns.ⓘ Information Ratio [R_Info]

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Information Ratio Solution

STEP 0: Pre-Calculation Summary

Formula Used

Information Ratio = (Portfolio Return-Benchmark Return)/Tracking Error
R_Info = (R _p-BR)/TE
This formula uses 4 Variables

Variables Used

Information Ratio - Information Ratio is a measure of the excess return of an investment relative to a benchmark, adjusted for the volatility of those excess returns.
Portfolio Return - Portfolio Return refers to the gain or loss realized by an investment portfolio containing several types of investments.
Benchmark Return - Benchmark Return refers to the return achieved by a designated benchmark index over a specific period of time.
Tracking Error - Tracking Error is a measure of how closely a portfolio follows the index it is benchmarked against.

STEP 1: Convert Input(s) to Base Unit

Portfolio Return: 5 --> No Conversion Required
Benchmark Return: 3 --> No Conversion Required
Tracking Error: 8 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

R_Info = (R _p-BR)/TE --> (5-3)/8

Evaluating ... ...

R_Info = 0.25

STEP 3: Convert Result to Output's Unit

0.25 --> No Conversion Required

FINAL ANSWER

0.25 <-- Information Ratio

(Calculation completed in 00.004 seconds)

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Created by Vishnu K

BMS College of Engineering (BMSCE), Bangalore

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Satyawati College (DU), New Delhi

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< Important Formulas of Investment Calculators

Compound Interest

LaTeX Go Future Value of Investment = Principal Investment Amount*(1+(Annual Interest Rate/Number of Periods))^(Number of Periods*Number of Years Money is Invested)

Certificate of Deposit

LaTeX Go Certificate of Deposit = Initial Deposit Amount*(1+(Annual Nominal Interest Rate/Compounding Periods))^(Compounding Periods*Number of Years)

Capital Gains Yield

LaTeX Go Capital Gains Yield = (Current Stock Price-Initial Stock Price)/Initial Stock Price

Risk Premium

LaTeX Go Risk Premium = Return on Investment (ROI)-Risk Free Return

Information Ratio Formula

LaTeX Go

Information Ratio = (Portfolio Return-Benchmark Return)/Tracking Error
R_Info = (R _p-BR)/TE

What is Information Ratio?

The information ratio is a widely used measure in investment analysis that evaluates the risk-adjusted performance of an investment portfolio relative to a chosen benchmark index. It quantifies the excess return generated by the portfolio manager for each unit of risk taken, specifically tracking error. The formula for information ratio is calculated by dividing the excess return of the portfolio over the benchmark by the tracking error of the portfolio. Essentially, it assesses the consistency and skill of the portfolio manager in generating returns beyond what could be achieved by simply tracking the benchmark. A higher information ratio indicates that the portfolio manager has been able to outperform the benchmark with less risk, implying superior performance and potentially adding value to investors. Conversely, a lower information ratio may suggest underperformance or excessive risk-taking relative to the benchmark.

How to Calculate Information Ratio?

Information Ratio calculator uses Information Ratio = (Portfolio Return-Benchmark Return)/Tracking Error to calculate the Information Ratio, The Information Ratio formula is defined as a measure of the excess return of a portfolio relative to a benchmark, adjusted for the volatility of those excess returns. Information Ratio is denoted by R_Info symbol.

How to calculate Information Ratio using this online calculator? To use this online calculator for Information Ratio, enter Portfolio Return (R _p), Benchmark Return (BR) & Tracking Error (TE) and hit the calculate button. Here is how the Information Ratio calculation can be explained with given input values -> 0.25 = (5-3)/8.

FAQ

What is Information Ratio?

The Information Ratio formula is defined as a measure of the excess return of a portfolio relative to a benchmark, adjusted for the volatility of those excess returns and is represented as R_Info = (R _p-BR)/TE or Information Ratio = (Portfolio Return-Benchmark Return)/Tracking Error. Portfolio Return refers to the gain or loss realized by an investment portfolio containing several types of investments, Benchmark Return refers to the return achieved by a designated benchmark index over a specific period of time & Tracking Error is a measure of how closely a portfolio follows the index it is benchmarked against.

How to calculate Information Ratio?

The Information Ratio formula is defined as a measure of the excess return of a portfolio relative to a benchmark, adjusted for the volatility of those excess returns is calculated using Information Ratio = (Portfolio Return-Benchmark Return)/Tracking Error. To calculate Information Ratio, you need Portfolio Return (R _p), Benchmark Return (BR) & Tracking Error (TE). With our tool, you need to enter the respective value for Portfolio Return, Benchmark Return & Tracking Error and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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