Where it is

ScreenRisk tab, Risk figures and Market linkAdvanced

The Risk tab, in Advanced: Treynor and Omega at 6% in the Risk figures card, Risk adjusted group; Weeks ahead of benchmark in the Market link card.

Index in this video: Allcap (strategy page).

What it means

Treynor is growth per year above the 6 percent risk free rate, per unit of beta: the return for the market risk taken. It prints as a plain decimal, so 0.39 means 39 percentage points per unit of beta. Omega at 6% adds up every week's return above the 6 percent hurdle and divides by the shortfalls below it; above 1, the gains past the hurdle outweighed the shortfalls. Weeks ahead of benchmark is the share of common weeks in which the strategy returned more than its benchmark: the win rate of performance measurement.

The formula

Treynor and Omega both measure return past a 6 percent hurdle; weeks ahead counts how often the strategy beat its benchmark.

As computed in the RupeeCase app
Treynor = (growth per year - 6%) / beta, shown when beta > 0
Omega at 6% = sum of (r - 6%/52) above 0 / sum of (6%/52 - r) above 0, weekly r
Weeks ahead = weeks the strategy beat the benchmark / common weeks

Worked example

Example only

  • Growth 18% a year, beta 1.2: (18 - 6) / 1.2 = 10 points, Treynor 0.10
  • Returns past the hurdle add to 30 points, shortfalls to 20: Omega 1.5
  • Ahead in 30 of 52 weeks: 58%

How to read it

  • Treynor compares strategies of similar beta; a beta near 0 makes it jump.
  • Omega above 1: the gains past the hurdle outweighed the shortfalls.
  • Weeks ahead above 50%: it beat the benchmark in more weeks than not.

Watch out

  • Treynor shows as a decimal while other yearly figures show percent.
  • Weeks ahead counts weeks, not by how much: a few large weeks can decide the return.
  • This recording reads month end history, so the label reads Months ahead.

Transcript

Tap Sound on for voice and music. These are the captions of the video, chapter by chapter.

  1. 0:00Where it is. Treynor and Omega sit in Risk figures, in Advanced.
  2. 0:08What it means. Treynor: growth per year above 6 percent, per unit of beta.
  3. 0:36Worked example. Worked example, example only: Growth 18% a year, beta 1.2: (18 - 6) / 1.2 = 10 points, Treynor 0.10. Returns past the hurdle add to 30 points, shortfalls to 20: Omega 1.5. Ahead in 30 of 52 weeks: 58%.
  4. 0:42How to read it. How to read it: Treynor compares strategies of similar beta; a beta near 0 makes it jump. Omega above 1: the gains past the hurdle outweighed the shortfalls. Weeks ahead above 50%: it beat the benchmark in more weeks than not.
  5. 0:49Watch out. Watch out: Treynor shows as a decimal while other yearly figures show percent. Weeks ahead counts weeks, not by how much: a few large weeks can decide the return. This recording reads month end history, so the label reads Months ahead.

Terms in this tutorial

  • TreynorReturn above a risk free rate for each unit of market sensitivity (beta).
  • Omega at 6%The weekly gains above a 6 percent a year hurdle added up, divided by the weekly shortfalls below it added up.
  • Weeks ahead of benchmarkThe share of weeks in which the strategy returned more than its benchmark.
  • betaSensitivity of a portfolio to the market.
  • Sharpe ratioReturn above a risk free rate for each unit of volatility.

Learn it in depth