If your fund performs better then another fund per the treynor method but underperforms per the sharpe measure, which fund is better diversified?

good question :slight_smile: i’ve made mistake on this one, and i kinda dig the explanation but i didnt have a chance to work through the formual to prove it mathematically. In general you should think that if std is the same but fund A has better treyoner then B that means A takes more unsystematic risk then B

Really hard to make an absolute statement. You have to be presented with beta and std to make a relative statement. In general, if a fund does well in treynor and poorly in sharpe, you can say it has “MORE” unsystematic risk==>Less diverisifed.

If alpha and Treynor measurements are better than Sharpe and M-squared measurements, the manager likely took on a significant amount of non-systematic risk. Since beta measures systematic risk and alpha and Treynor use beta, the non-systematic risk isn’t factored into their values. The high degree of non-systematic risk means that the manager is less diversified.

alright thanks guys makes sense now.