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Tracking error calculator: how closely a fund follows its index.

Paste the fund’s monthly returns and the index’s for the same months. The calculator measures how far apart they move.

  • Formula shown
  • Free, nothing stored
  • Share your result as a link

One return per month, same months as the index.

The default is a made up sample.

Tracking error, annualised0.10%
Tracking difference, a year−1.19%
Information ratio-11.00
Months compared12
100105110115120M0M2M4M6M8M10M12
  • Fund
  • Index
Tracking error = standard deviation of the monthly differences x the square root of 12.

01How it works

In plain words.

Tracking error is the volatility of the monthly differences between the fund and the index, annualised. Tracking difference is simply how much less (or more) the fund returned a year. An index fund wants both close to zero.

The formula

d = fund return - index return, each monthTracking error = stdev(d) x sqrt(12)Tracking difference = fund compound return - index compound returnInformation ratio = mean(d) x 12 / tracking error

02Worked example

The default numbers, by hand.

The 12 month sample: the fund trails by about 0.1 point a month with small wobbles, a tracking difference of about 1.2% a year and a tracking error of 0.10%.

InputValue
Fund monthly returns, % (sample)12 values (the default sample)
Index monthly returns, % (sample)12 values (the default sample)
ResultValue
Tracking error, annualised0.10%
Tracking difference, a year−1.19%
Information ratio-11.00
Months compared12

03Key concepts

What to know before you use it.

Two different costs

Tracking difference is mostly the TER and cash drag; it shows up as a lower return. Tracking error is the noise around the index; it shows up as uncertainty.

Where to find the figures

SEBI requires index funds and ETFs to disclose tracking error, and many fund houses publish tracking difference on their websites.

Good to know

  • Use total return index (TRI) figures, which include dividends, not the price index.
  • Twelve months or more give a steadier figure.

04Assumptions

What the calculator assumes.

  • Monthly returns in percent, aligned month by month.

05Questions

Asked about the Tracking error.

What is tracking error?

The annualised standard deviation of the difference between a fund’s return and its index’s return. Lower means the fund follows the index more closely.

Tracking error or tracking difference?

Tracking difference is the average shortfall a year; tracking error is how much that shortfall varies. Both matter for an index fund.

06Keep going

Learn the idea, see it applied.

Module 6.4ETFs: How They Work and Why They Matter for Systematic Investors8 min read, Path 06Module 6.5Index Funds vs ETFs vs Active: The Evidence in India8 min read, Path 06Module 1.3Indices & Benchmarks13 min read, Path 01The matching indexNifty 50 Equal WeightAll 50 Nifty names, equal weight. The simplest card on the lineup.CAGR16.4%Sharpe1.13Max DD−15.7%Model, back tested, as of 27 Apr 2026. Not client returns, not a promise. Risk band: Moderate.

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Education only, not investment advice. RupeeCase is a technology platform operated by QC Alpha Technologies Pvt Ltd; it is not a fund, a PMS or a SEBI registered investment adviser. Model returns are back tested and not a promise of future returns. Figures carry the date they were checked.