![How to graph efficient frontier in excel for mac](https://kumkoniak.com/39.jpg)
Where Cov(R 1, R 2 ) represents the covariance of the two asset returns. The formula for portfolio variance is given as: The variance of a portfolio is not just the weighted average of the variance of individual assets but also depends on the covariance and correlation of the two assets. Levels of variance translate directly with levels of risk higher variance means higher levels of risk and vice versa. Where w 1, w 2 are the respective weights for the two assets, and E(R 1 ), E(R 2 ) are the respective expected returns. The portfolio’s expected return is a weighted average of its individual assets’ expected returns, and is calculated as:
![how to graph efficient frontier in excel for mac how to graph efficient frontier in excel for mac](https://i.stack.imgur.com/aW4h0.png)
Portfolio expected return and varianceįor the sake of simplicity, we will construct a portfolio with only two risky assets. The process to construct the CAL for a collection of portfolios is described below. The Capital Allocation Line (CAL) is a line that graphically depicts the risk-and-reward profile of assets, and can be used to find the optimal portfolio.
![how to graph efficient frontier in excel for mac how to graph efficient frontier in excel for mac](http://turingfinance.com/wp-content/uploads/2013/09/Mean-Variance-Optimization.jpg)
Updated OctoCapital Allocation Line (CAL) and Optimal Portfolio
![How to graph efficient frontier in excel for mac](https://kumkoniak.com/39.jpg)