brainsX

The Tb model is a small actively selected portfolio combined with a market portfolio. say like 95% Portfolio 5% selection. So you're hoping to make a gain off of that 5% to beat the market . The formula with unsystematic risk is how to weight to an active portfolio of 2 shares. The one with larger unsystematic risk has a smaller weighting.

the denominator in the information ratio is active risk

Active risk squared is equal to active factor risk and active specific risk