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Information Ratio Calculator

Quantify an active manager's excess return per unit of tracking error to evaluate whether the alpha generated justifies active risk.

Input Method

Direct Calculation

Excess Return (%)

Portfolio return minus benchmark return

Tracking Error (%)

Standard deviation of excess returns

Return Series Calculation

Portfolio Returns (%)

Benchmark Returns (%)

Results

Information Ratio

Excess Return

Average excess return

Tracking Error

Standard deviation

Information Ratio Benchmarks

Additional Analysis

Average Portfolio Return

Average Benchmark Return

Number of Periods

Formula & Explanation

Information Ratio Formula

Information Ratio = Excess Return / Tracking Error

Where Excess Return = Average Portfolio Return - Average Benchmark Return
And Tracking Error = Standard Deviation of Excess Returns

What It Measures

Risk-adjusted excess return generated by active management
Consistency of outperformance relative to benchmark
Manager's ability to generate alpha per unit of tracking error
Quality of active management decisions

Interpretation Guidelines

Information Ratio Values:

> 0.75: Excellent active management
0.5 - 0.75: Good active management
0.25 - 0.5: Reasonable active management
< 0.25: Poor active management

Key Insights:

Higher ratios indicate better risk-adjusted performance
Considers both return and consistency of outperformance
Negative ratios suggest underperformance
Compare ratios across similar strategies