Portfoliokäyrä

Portfoliokäyrä, often translated as portfolio curve, is a concept used in finance and investment management. It visually represents the relationship between the expected return of an investment portfolio and its risk. Typically, risk is measured by standard deviation or volatility.

The portfolio curve is derived by plotting various combinations of assets and their respective weights within a portfolio. For each possible portfolio composition, the expected return and its associated risk are calculated. These data points are then plotted on a graph, with expected return on the vertical axis and risk on the horizontal axis.

The resulting curve illustrates the trade-off between risk and return. Generally, higher expected returns are associated with higher levels of risk. The curve shows that as an investor increases the potential reward they seek, they must also accept a greater degree of uncertainty or volatility in their portfolio's performance.

A key aspect of the portfolio curve is its ability to demonstrate diversification benefits. By combining assets that are not perfectly correlated, it is often possible to achieve a higher expected return for a given level of risk, or a lower level of risk for a given expected return, compared to holding individual assets in isolation. The curve helps investors identify portfolios that offer the most efficient risk-return profile.