The Treynor Ratio differs from the Sharpe Ratio insofar as the beta to the Market Benchmark is used as a measure of risk rather than the standard deviation of the manager series.
Treynor Ratio = (AnnRtn(r1, ..., rn) - AnnRtn(c1, ..., cn)) / (beta of manager to market)
where:
r1, ..., rn = manager return series
c1, ..., cn = cash equivalent return series
The Treynor Ratio is a risk-adjusted measure of return which uses beta to represent risk.
Related Statistics:
Annualized Return
Beta
