The Treynor Ratio. Now, the Treynor Ratio got its name from Jack Treynor, who was an American economist, known as one of the inventors of the Capital Asset Pricing Model. And the Treynor Ratio measures a portfolio's return in excess of the risk-free rate while also factoring in risk. However, it differs in the sense that it compares excess returns to only systematic risk. So it's very similar to the Sharpe Ratio. But instead of using the standard deviations of returns as a measure of risk, the Treynor Ratio uses Beta. Now, Beta, as we popularly know is a measure of what we call systematic risk. Well, and it calculates the extent that a portfolio or a stock correlates or moves along with the broad market. Therefore, a Beta of greater than one is considered to be more risky than a security or portfolio that is less than one. And Beta, again, is a measurement of systematic risk and its risk at a macro level that cannot be diversified away by the portfolio manager. So it's essentially a measure of unavoidable risk. In here is the Treynor Ratio formula, excess returns same as the Sharpe Ratio the return on the portfolio minus the risk free rate and Beta as the denominator signifying systematic risk. Now, just like the other risk adjusted measures, the higher the ratio, the better performance by the portfolio manager. And some investors and analysts prefer the Treynor Ratio over the Sharpe Ratio when they're looking at diversified portfolios, because in diversified portfolios only systematic risk is remaining as all other risks are diversified away. And in that sense, it's similar to the Jensen's Alpha calculation where we're comparing excess returns on a portfolio relative to the portfolio's systematic risk.