What Is a Mean-Variance Analysis?

 Hello Friends lets understand this Mean -Variance  most important factor in Investment & Trading 

To evaluate this we have understand below things 

  How it works

• Expected return: Measured by the mean of the probability distribution of returns 
Risk: Measured by the standard deviation or variance of the distribution 
Variance: Measures how spread out the numbers in a data set are from the mean 

Why it's used

Investors use mean-variance analysis to decide where to invest based on their risk tolerance 
It helps investors find the biggest reward at a given level of risk 
It helps investors find the least risk at a given level of return 

How to calculates

Take the differences between each number in a data set and the mean 
Square the differences to make them positive 
Divide the sum of the squares by the values in the data set 

Related concepts

Mean-variance analysis is part of Modern Portfolio Theory (MPT) 
The M-V rule is the foundation of the Capital Asset Pricing Model (CAPM) 

Practical Example in Investing:

• Stock A: Expected return of 8%, variance of 16%
• Stock B: Expected return of 5%, variance of 25%
• Portfolio: By combining Stock A and Stock B in a way that balances their variances, you can lower the overall risk of the portfolio while maintaining an acceptable level of return.

I hope you get it Right 

Wise investing 

Investing in knowledge pays the best interest