Risk
The inconsistency of possible future results from an investment.
Probability Distribution
the predicted chance of something occurring given different outcomes.
Standard Deviation
total risk measurement tool that is used to compare possible outcomes with carious probability of occurrence
Required Rate of Return
the return an investor requires in order to invest his money in a given investment versus a different investment
Coefficient of Variation
risk measurement toll that is used to compare investments with different expected returns
Efficient Portfolio
one that has higher returns or lower standard deviation than comparative portfolio
Efficient Frontier
set of efficient portfolio
Capital Market Line
used in the capital asset pricing model to show the rates of return for efficient portfolio based on the risk free rate of return and standard deviation of a given portfolio
Beta Coefficient
the representation of systematic risk
Capital Asset Pricing Model (CAPM)
popular method used to analyze portfolio risk versus return. IT helps an investor determine the required rate of return on investment
Correlation Coefficient
the coefficient that indicates how closely related two items cue to one another
Portfolio
collection of various assets or investment
Characteristic Line
line in a graph that shows the market risk of an investment
Covariance
commingled movement amongst items in a graph
Systematic Risk
risk that is inherent in the market as a whole. It is not able to be lessened or increased it just is what it is
Unsystematic Risk
risk that is unique to a company itself. It is able to be lessened or increased based on action a company can take