The Treynor Ratio differs from the Sharpe Ratio insofar as the beta to the Market Benchmark is used as a measure of risk rather than the standard deviation of the manager series.

    Treynor Ratio = (AnnRtn(r₁, ..., r_n) - AnnRtn(c₁, ..., c_n)) / (beta of manager to market)

where:

    r₁, ..., r_n = manager return series
    c₁, ..., c_n = cash equivalent return series

The Treynor Ratio is a risk-adjusted measure of return which uses beta to represent risk.

To view our quick tip video on the Treynor Ratio, click the following link: 
http://www.styleadvisor.com/sites/default/files/quick_tip_video/treynor_wmv_83737.wmv