Information Ratio

A risk-adjusted performance metric that measures excess return relative to benchmark per unit of tracking error, calculated as (portfolio return − benchmark return) / tracking error. A higher Information Ratio indicates better outperformance relative to risk taken relative to the benchmark. For example, an Information Ratio of 0.5 means the strategy generates 0.5% excess return for every 1% of tracking error. This metric is widely used to evaluate active managers.