The Treynor Ratio is a financial metric used to evaluate the performance of an investment portfolio by measuring its return relative to its risk. Specifically, it assesses how much excess return an investor earns for each unit of risk taken, where risk is defined by the portfolio's beta. A higher Treynor Ratio indicates a more favorable risk-adjusted return. To calculate the Treynor Ratio, you subtract the risk-free rate of return from the portfolio's return and then divide that result by the portfolio's beta. This ratio helps investors compare different portfolios or funds, allowing them to make informed decisions based on risk-adjusted performance.