TradingCalculated
Calculations run privately in your browser
Trading Metrics app

Information Ratio Calculator

Measure how consistently a portfolio outperforms its benchmark: average active return divided by tracking error.

Risk-Adjusted RatiosAdvanced
Your inputs
12 values
Your portfolio's returns, oldest first.
12 values
The benchmark's returns for the same periods, in the same order.
Results
Information ratio (annualised)3.62per period 1.045 × √12
Average active return+0.5%per period
Tracking error0.479%per period · 1.66% annualised
Periods beating benchmark10 of 12
The information ratio measures how consistently you beat the benchmark: average outperformance divided by how much that outperformance varies (tracking error). Above 0.5 is good; above 1 is exceptional.
Cumulative active return

Not financial advice. Results are estimates based on the values you enter and simplified assumptions; real trades are affected by fees, slippage, gaps and other factors. Trading involves substantial risk of loss. Read the full disclaimer.

How to calculate the information ratio

Active return αᵢ = R_p,i − R_b,i Tracking error = stdev(αᵢ) (sample, n − 1) IR = mean(αᵢ) ÷ Tracking error Annualised IR = IR × √(periods per year)

Worked example

  1. Monthly portfolio returns beat the benchmark by +1, +2, 0 and +3 percentage points.
  2. Average active return = 1.5%; tracking error = 1.29%.
  3. Monthly IR = 1.5 ÷ 1.29 = 1.16; annualised ≈ 1.16 × √12 = 4.0 — an exceptionally consistent (and small) sample.

How to interpret the information ratio

Annualised information ratios above 0.5 are generally considered good and above 1.0 exceptional. Unlike alpha, IR rewards consistency: a manager who beats the benchmark by a little every month scores higher than one with the same average but wild swings.

Limitations and common mistakes

  • The benchmark must be appropriate — beating the wrong index proves nothing.
  • Use at least 24–36 monthly observations before trusting the number.
Risk-Adjusted Ratios

Sharpe Ratio Calculator

Measure excess return per unit of volatility from annual figures or a series of returns.

12% return · 2% Rf · 8% σ → 1.25
Risk Metrics

Jensen's Alpha Calculator

Compare actual return with the CAPM-expected return for the beta taken to isolate skill.

15% return · β 1.2 · market 10% · Rf 2% → α 3.4%
Risk Metrics

Beta Calculator

Measure how sensitive an asset or portfolio is to market moves from two return series.

Asset vs index returns → β, correlation, R²

Information Ratio calculator FAQ

What is tracking error?

The standard deviation of the difference between portfolio and benchmark returns — how far and how often you deviate from the benchmark.

How is IR different from Sharpe?

Sharpe compares returns with the risk-free rate and total volatility; IR compares them with a benchmark and tracking error.