Minimum-variance portfolio

Minimum-variance portfolio

The portfolio of risky assets with lowest variance.

Minimum-Variance Portfolio

A portfolio of individually risky assets that, when taken together, result in the lowest possible risk level for the rate of expected return. Such a portfolio hedges each investment with an offsetting investment; the individual investor's choice on how much to offset investments depends on the level of risk and expected return he/she is willing to accept. The investments in a minimum variance portfolio are individually riskier than the portfolio as a whole. The name of the term comes from how it is mathematically expressed in Markowitz Portfolio Theory, in which volatility is used as a replacement for risk, and in which less variance in volatility correlates to less risk in an investment.
References in periodicals archive ?
In two of the three historical scenarios, gold proved more effective than commodities, real estate and TIPS at enhancing investor's risk-adjusted returns, and achieving both the maximum reward-risk portfolio and the minimum-variance portfolio.