Information Ratio Calculator
Results are estimates based on the values you enter. Recheck your inputs and assumptions before using the output for decisions.
Calculate information ratio from portfolio return, benchmark return, tracking error, and portfolio value.
Information Ratio Calculator
Free online information ratio calculator to compare portfolio outperformance against a benchmark relative to tracking error. This calculator is useful for investors, portfolio managers, finance students, analysts, advisers, and anyone reviewing active management quality. Information ratio is a common performance measure in portfolio analysis because it shows how much active return a portfolio earned for each unit of tracking error taken against its benchmark. That makes it useful when evaluating whether outperformance came efficiently or whether risk taken relative to the benchmark was high compared with the excess return earned.
This calculator uses four inputs. Portfolio value means the amount used to show ending-value comparisons. Portfolio return means the return earned by the portfolio over the measured period. Benchmark return means the return earned by the benchmark over the same period. Tracking error means the volatility of active returns relative to the benchmark. Once those values are entered, the calculator shows information ratio, active return, portfolio ending value, and benchmark ending value. These outputs make it easier to compare both the relative performance ratio and the dollar effect on a chosen portfolio value.
The formula of information ratio
Active return = Portfolio return – Benchmark return
Information ratio = Active return / Tracking error
Portfolio ending value = Portfolio value x (1 + Portfolio return)
Benchmark ending value = Portfolio value x (1 + Benchmark return)
Here portfolio return means the percentage return earned by the portfolio, benchmark return means the percentage return earned by the comparison benchmark, active return means the excess return above or below the benchmark, tracking error means the volatility of active returns, information ratio means the amount of active return earned for each unit of tracking error, and ending values translate the percentage results into money terms on the chosen portfolio value.
Solved Example
Example 1: Find the information ratio if portfolio value is $100,000, portfolio return is 12%, benchmark return is 9%, and tracking error is 4%.
Solve: Active return = 12% – 9% = 3%
Information ratio = 3% / 4% = 0.75
Portfolio ending value = 100000 x 1.12 = $112,000
Benchmark ending value = 100000 x 1.09 = $109,000
Example 2: Find the result if portfolio value is $250,000, portfolio return is 15%, benchmark return is 10%, and tracking error is 6%.
Solve: Active return = 15% – 10% = 5%
Information ratio = 5% / 6% = 0.8333
Portfolio ending value = 250000 x 1.15 = $287,500
Benchmark ending value = 250000 x 1.10 = $275,000
Example 3: Find the result if portfolio value is $50,000, portfolio return is 8%, benchmark return is 10%, and tracking error is 5%.
Solve: Active return = 8% – 10% = -2%
Information ratio = -2% / 5% = -0.40
Portfolio ending value = 50000 x 1.08 = $54,000
Benchmark ending value = 50000 x 1.10 = $55,000
Table of information ratio calculator
| Portfolio Return | Benchmark Return | Tracking Error | Information Ratio |
|---|---|---|---|
| 12% | 9% | 4% | 0.75 |
| 15% | 10% | 6% | 0.83 |
| 8% | 10% | 5% | -0.40 |
| 18% | 12% | 7% | 0.86 |
How to use this information ratio calculator
Enter the portfolio value in the proper input field. After that, enter the portfolio return, the benchmark return, and the tracking error for the same period. Then click the calculate button. The calculator will show information ratio, active return, portfolio ending value, and benchmark ending value in the result box.
This calculator is useful when judging active management performance relative to a benchmark. A higher information ratio usually suggests the portfolio delivered better benchmark-relative return for the amount of tracking error taken. A lower or negative information ratio suggests weaker active efficiency. Looking at the ending values beside the ratio can also help translate the performance into a more intuitive money result for a chosen portfolio size.
When using the result, remember that information ratio depends on the quality of the benchmark and the accuracy of the tracking error estimate. A poor benchmark choice can make the ratio less meaningful, and the measure does not capture every aspect of portfolio quality. Even so, information ratio remains one of the clearest quick tools for evaluating active return efficiency. This calculator gives a fast numerical view that supports portfolio review, performance analysis, and finance learning.