To calculate the Treynor measure, use the following formula:
Treynor measure = (R –Rf) / b
where:
R = return
Rf = risk-free return
b = beta
The Treynor measure for the Miranda Fund is:
(0.102 -0.02)/1.10 = 0.0745
The Treynor measure for the S&P 500 is:
(-0.225 – 0.02)/1.00 = -0.2450
Based on the Treynor measure, Blakely outperformed the S&P 500 on a risk-adjusted basis (when risk is defined as systematic risk). The Treynor ratio is meaningful for portfolios that are well-diversified
