Mean-Variance Analysis

Mean-variance analysis is a method used by investors to balance risk and return when choosing an investment portfolio. It evaluates the average expected return (mean) against the variability or fluctuation in those returns (variance). The goal is to find an optimal mix of assets that offers the highest possible return for a given level of risk, or the lowest risk for a desired return. This approach helps investors make informed decisions by analyzing the trade-off between potential reward and potential variability in investment outcomes.