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Information Ratio & Active Return Calculator

Compare portfolio return with benchmark return relative to tracking error.

  • Formula & worked example
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Calculator inputs

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How to use this calculator

  1. Enter the known values in the units shown. Results update as you type.
  2. Edit a calculated value to solve backwards, or lock a value to hold it fixed.
  3. Use the worked example to check the method. Reset restores the starting fields.

Use the result with context

Results are estimates for planning and education. Confirm rates, taxes, fees, and legal requirements with the relevant institution or a qualified professional before making a financial decision.

Formula and method

A portfolio rising from 100,000 to 110,000 returns 10% with no external cash flows. Against a 6% benchmark and 2% tracking error, the information ratio is 2.

Information ratio = (portfolio return − benchmark return) ÷ tracking error

Worked example

Enter these known values and leave the other values blank.

Beginning portfolio value
100000 USD
Ending portfolio value
110000 USD
Benchmark return
6 %
Tracking error
2 %
Portfolio return
10 %
Information ratio
2

Assumptions and limitations

  • Use matching periods and annualization conventions. Tracking error measures variability of active return, not total portfolio volatility. The start/end-value return assumes no external cash flows. This does not forecast performance.
  • Use consistent periods, rates and accounting definitions. These calculations describe the entered assumptions.

Common questions

Which periods should the return and tracking error use?

Use matching periods and annualization conventions. Tracking error measures variability of active return, not total portfolio volatility. The start/end-value return assumes no external cash flows. This does not forecast performance.

References

The calculation equations, inverse formulas, units, and input rules were imported from this source. Bookify provides the interface and equation solver.

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