Information Ratio Pass Node
Information Ratio — Series Input
Overview
The Information Ratio Pass Node measures risk-adjusted active return — how much excess return is generated relative to the benchmark per unit of tracking error. It is widely used in portfolio management to evaluate active strategy value.
A high IR indicates the strategy consistently generates excess returns with low deviation from its benchmark, which is more valuable than volatile outperformance.
Formula
period bars. Returns null during warm-up or when tracking error is zero.Parameters
| Parameter | Default | Description |
|---|---|---|
| period | 20 | Rolling window in bars |
Inputs & Outputs
| Slot | Direction | Type | Description |
|---|---|---|---|
| input | Input | { values, timestamps } | Returns series (portfolio returns aligned with benchmark) |
| values | Output | (number | null)[] | Information ratio per bar; nulls during warm-up |
| timestamps | Output | number[] | Unix timestamps aligned to input |
Use Cases
Active Fund Management
Evaluate whether active management adds consistent value relative to the benchmark, measured by IR > 0.5.
Strategy Comparison
Compare strategies on the same benchmark to identify which consistently adds alpha with lower tracking error.
Rolling Performance Monitor
Monitor rolling IR to detect when a strategy's active edge is eroding over time.
Tips & Best Practices
IR > 0.5 Is Good
An IR above 0.5 is generally considered strong for active management. Above 1.0 is exceptional.
Needs Benchmark Returns
The input should be active (excess) returns over benchmark, not raw portfolio returns, for the IR to be meaningful.
Related to Sharpe
IR is like Sharpe but measures active return vs tracking error instead of total return vs total volatility.