Treynor ratio
Excess return per unit of market sensitivity: the denominator is beta rather than total dispersion.
Formula
The numerator is the return above the risk-free rate for the period, the denominator the beta against the chosen benchmark. Both are taken from the same window.
How to read the number
It makes sense for a component of a large portfolio: there the holding's own dispersion is partly cancelled by its neighbours, while its market sensitivity stays with it.
When the metric lies
Also known as: treynor measure