Minimum Variance Portfolio
The portfolio with the lowest possible volatility.
The minimum variance portfolio sits at the leftmost point of the efficient frontier. It has the lowest volatility among all possible portfolios given the available assets. This portfolio prioritizes risk reduction over return maximization.
Related Terms
Efficient Frontier
The set of portfolios offering the highest return for each level of risk.
Portfolio Volatility
Standard deviation of portfolio returns — total risk including diversification effects.
Sharpe Ratio
Risk-adjusted return: excess return divided by volatility.
Covariance Matrix
Captures how asset returns move together — the foundation of diversification.
Maximum Sharpe Portfolio
The portfolio with the highest risk-adjusted return.
Capital Market Line (CML)
The line from the risk-free rate through the optimal portfolio.