Information Ratio Calculator

Calculate information ratios to measure portfolio performance and active management effectiveness. Analyze risk-adjusted returns and tracking error with comprehensive metrics.

✓ Active Return ✓ Tracking Error ✓ Risk-Adjusted Performance

Information Ratio Calculator

Portfolio & Benchmark Returns

Annual portfolio return

Annual benchmark return

Annual portfolio standard deviation

Annual benchmark standard deviation

Correlation & Risk Metrics

Correlation between portfolio and benchmark

Annual risk-free interest rate

Analysis Period

Analysis period in years

Number of return observations

Portfolio Details

Type of portfolio being analyzed

Benchmark index used for comparison

Information Ratio Formula

Measure risk-adjusted active return performance

Information Ratio:

IR = (Portfolio Return - Benchmark Return) / Tracking Error
Where Tracking Error = Standard Deviation of Active Returns

Portfolio Scenarios

Active Equity Fund
Outperforming fund with moderate tracking error
Index Fund
Low tracking error, minimal active return
Hedge Fund
High active return with higher tracking error

IR Interpretation

IR > 0.5: Good active management
IR > 0.75: Very good performance
IR > 1.0: Excellent active management
IR < 0: Underperforming benchmark
Higher IR: Better risk-adjusted performance

Key Metrics

✓ Active Return: Excess return over benchmark
✓ Tracking Error: Volatility of active returns
✓ Sharpe Ratio: Risk-adjusted return measure
✓ Beta: Systematic risk relative to benchmark
✓ Alpha: Risk-adjusted excess return
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Understanding Information Ratio

The Information Ratio measures the consistency of a portfolio manager's ability to generate excess returns relative to a benchmark, adjusted for the risk taken.

  • Active Return: Portfolio return minus benchmark return
  • Tracking Error: Standard deviation of active returns
  • Risk-Adjusted: Considers both return and consistency
  • Manager Skill: Measures active management effectiveness

Applications

Fund Selection

Compare active managers and select superior performers.

Performance Evaluation

Assess portfolio manager skill and consistency.

Risk Management

Understand active risk and return trade-offs.

Fee Justification

Determine if active management fees are justified.