Information Ratio Calculator
Enter portfolio return, benchmark return and tracking error.
Information ratio
β
Enter values above
Active return
β
Assessment
β
Active return needed for IR of 1
β
Active risk taken
β
Return per 1% of tracking error
β
Worked example
With the default inputs shown below, this calculator returns the following results:
| Input | Value |
|---|---|
| Portfolio return (%) | 10 |
| Benchmark return (%) | 8.5 |
| Tracking error (%) | 4 |
| Risk-free rate (%) | 3 |
| Result | Value |
|---|---|
| Information ratio | 0.4 |
| Active return | 1.50% |
| Assessment | Modest |
| Active return needed for IR of 1 | 4.00% |
| Active risk taken | 4.00% |
| Return per 1% of tracking error | 0.38% |
Values shown are produced by this page in your browser; change any input to update them.
How to use the Information Ratio Calculator
- Portfolio return (%) β default 10
- Benchmark return (%) β default 8.5
- Tracking error (%) β default 4
- Risk-free rate (%) β default 3
- Press Calculate to update the results instantly.
Frequently asked questions
Above 0.5 is good, above 0.75 is excellent and sustained ratios above 1.0 are very rare. Many institutional investors will not allocate to a manager below 0.3.
Sharpe measures return per unit of total volatility against a risk-free rate. The information ratio measures active return per unit of tracking error against a benchmark, so it compares managers rather than assets.
Not necessarily. Information ratios are noisy and tend to regress towards zero. Use them over long periods and alongside qualitative assessment.