Finance & Investment · Risk & Portfolio
Fund vs Benchmark Comparison
Compare a mutual fund's or portfolio's returns with its benchmark index: annualised out- or under-performance, how often it beat the index, the information ratio and tracking error.
A ready-made version of the Tracking Error & Tracking Difference Calculator.
Your inputs
Quick start — try a typical case
Both in %, same periods, oldest first.
Your result Live
Outperformance a Year
0.62%
8.51% for the fund vs 7.89% for the benchmark, annualised
- Tracking Error (annualised)
- 1.18%
- Information Ratio
- 0.52
- Fund Return (annualised)
- 8.51%
- Benchmark Return (annualised)
- 7.89%
- Periods the Fund Beat the Benchmark
- 14 of 24
- Correlation
- 0.997
How this is calculated
Tracking error = stdev(fund − benchmark) × √periods per year · Tracking difference = annualised fund − annualised benchmark · IR = TD ÷ TE
- TE
- How consistently the fund follows the benchmark (lower = closer)
- TD
- How much it actually lags (−) or leads (+) per year
For an index fund, tracking difference is the cost you actually bear (expenses, cash drag) — closer to zero is better — and tracking error shows how consistently it follows the index. For an active fund, the information ratio tells you whether its out-performance was large relative to how far it strayed from the benchmark.
Assumptions & sources
- Fund and benchmark returns are for the same periods and include dividends (total-return index).
- Tracking error uses the sample standard deviation of the period gaps, annualised by √periods.
- 1Disclosure of tracking error and tracking difference for index funds and ETFs — SEBI
- 2Investments (Bodie, Kane & Marcus), chapters on returns, compounding and the time value of money — McGraw-Hill
Calculator ID FIN-RISK-TRACK-001/benchmark · version 1.0.0
Common questions
What benchmark should I use?
The one in the fund's factsheet — a total-return index (TRI) that includes dividends, otherwise the comparison flatters the fund.
Is beating the benchmark in most months enough?
Look at the annualised difference and the information ratio together: frequent small wins can be wiped out by a few large losses.