Markowitz model

The Markowitz model is a financial theory that helps investors build a portfolio of assets (like stocks and bonds) to balance risk and return. It suggests choosing a combination that offers the highest expected return for a given level of risk or the lowest risk for a desired return. By analyzing how different investments' prices move together, investors can diversify their holdings, reducing overall risk without sacrificing potential gains. Essentially, it’s a mathematical approach to optimizing investments to achieve efficient, balanced portfolios tailored to individual risk preferences.