Information Ratio Calculator

IR above 0.5 is considered good. Above 1.0 is exceptional. Most active managers struggle to sustain an IR above 0.5 over the long term.

Tracking error is the standard deviation of the difference between portfolio and benchmark returns. Higher tracking error means more active deviation from the benchmark.

Fund selectors use IR to compare active managers. It normalizes alpha by the amount of active risk taken, penalizing high-volatility strategies.