What is the Information Ratio?

The Information Ratio (IR) is the mean active return divided by the tracking error (standard deviation of active returns), usually annualised. It measures how efficiently a manager converts active risk into excess return.

How do you calculate the Information Ratio?

We compute active returns (portfolio minus benchmark), take their mean, and divide by tracking error. You can choose Standard (equal-weighted) or EWMA (RiskMetrics) tracking error and set a rolling window.

What is tracking error?

Tracking error is the standard deviation of active returns (portfolio minus benchmark), annualised. It quantifies how tightly a portfolio follows its benchmark.

How is IR different from the Sharpe ratio?

Sharpe uses excess return over the risk-free rate divided by total volatility; IR uses excess return over the benchmark divided by active return volatility (tracking error).

Can I use prices or returns?

Yes. Paste price series to derive returns or paste returns directly. You can also choose data frequency and set the lookback window.

OPTIMLY Calculators | Information Ratio (IR) Calculator

Market data

Data type:

Add / remove rows

Performance settings

Observations

Calculator options

Data frequency:

EWMA λ

Return type

Standard deviation estimator