InsidersTradesSigma
Performance & Risk Metrics
A risk-adjusted performance metric that measures excess return per unit of tracking error, quantifying how consistently an investment strategy or quant signal outperforms a specified benchmark.
The Information Ratio matters when signal quality and consistency count for more than absolute returns. Unlike the Sharpe Ratio, which measures excess return against total volatility, the IR compares returns to a benchmark and penalizes only the active risk taken to beat it. A high IR means a strategy outperforms its benchmark steadily rather than in a few lucky bursts.
As a common rule of thumb, an annualised IR around 0.5 is good and above 1.0 is exceptional, while a low IR suggests the edge is too noisy to rely on. Pairing the IR with the Information Coefficient gives a fuller read on whether a factor's outperformance is repeatable.
Formula