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Efficient frontier

The set of portfolios each of which offers the highest expected return for its own level of dispersion. Anything below the line loses on both dimensions at once.

How to read the number

The point of the exercise is not the specific weights but the finding that adding an asset weakly related to the rest pushes the frontier upward, even when that asset looks dull on its own.

When the metric lies

Also known as: mean variance frontier

Related terms