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    Risk and Return Trade Off in Portfolio Analysis

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    Vaishali Trivedi Ojha
    The document discusses risk and return trade off in portfolio analysis. It defines risk and return, and describes different types of risk including systematic and unsystematic risk. It also explains how risk and return are related, with higher risk investments typically offering higher potential returns. The risk-return tradeoff exists both at the individual asset level and the overall portfolio level.

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    Risk and Return Trade Off in Portfolio Analysis

    Uploaded by

    Vaishali Trivedi Ojha
    77 views15 pages
    The document discusses risk and return trade off in portfolio analysis. It defines risk and return, and describes different types of risk including systematic and unsystematic risk. It also explains how risk and return are related, with higher risk investments typically offering higher potential returns. The risk-return tradeoff exists both at the individual asset level and the overall portfolio level.

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    The document discusses risk and return trade off in portfolio analysis. It defines risk and return, and describes different types of risk including systematic and unsystematic risk. It also explains how risk and return are related, with higher risk investments typically offering higher potential returns. The risk-return tradeoff exists both at the individual asset level and the overall portfolio level.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    77 views15 pages

    Risk and Return Trade Off in Portfolio Analysis

    Uploaded by

    Vaishali Trivedi Ojha
    The document discusses risk and return trade off in portfolio analysis. It defines risk and return, and describes different types of risk including systematic and unsystematic risk. It also explains how risk and return are related, with higher risk investments typically offering higher potential returns. The risk-return tradeoff exists both at the individual asset level and the overall portfolio level.

    Copyright:

    © All Rights Reserved
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    Download as pptx, pdf, or txt
    of 15

    RISK AND RETURN TRADE OFF IN

    PORTFOLIO ANALYSIS

    Param Gogri 16
    Payank Nandu 39
    Meet Jain 17
    Kartik Mehta 32
    Jeett Mehta 31
    Jigar Desai 11
    1

    CONTENT
    SR NO. INDEX PAGE NO.
    1 INTRODUCTION 2
    2 RISK AND TYPES OF RISK 3-8
    3 WHAT IS RETURN? 9
    4 RISK RETURN TRADE OFF 10-11
    MEANING
    5 RISK RETURN TRADE OFF AND 12
    PORTFOLIO LEVEL
    6 CONCLUSION 13
    2

    WHAT IS RISK?

    Risk implies future uncertainty about


    deviation from expected earnings or
    expected outcome.
    3
    TYPES OF RISK

    SYSTEMATIC UNSYSTEMATIC
    RISK RISK

    1)Market Risk,
    1) Business
    2)Interest rate
    Risk
    Risk
    2) Financial
    3)Purchasing
    Risk
    power
    4

    SYSTEMATIC RISK:-

    • Systematic risk refers to the risk inherent


    to the entire market or market segment.
    • Systematic risk also referred to as non-
    diversifiable risk or market risk.
    5

    UNSYSTEMATIC RISK:-

    • Unsystematic risk is unique to a


    specific company or industry.
    • The fluctuations in returns of a
    company arising due to micro-
    economic factors are termed as
    unsystematic risks. 
    6
    7

    TYPES OF SYSTEMATIC RISK

    1) Market Risk:-Market risk is referred to as stock variability due to changes in


    investor’s attitudes and expectations.

    2) Interest Rate Risk:There are four types of movements in prices of stocks in


    the market.These may be termed as(a) Long-term,(b) Cyclical (bull and bear
    markets),(c) Intermediate or within the cycle, and(d) Short-term.

    3)Purchasing Power Risk:Purchasing power risk is also known as inflation risk.


    This risk arises out of change in the prices of goods and services and technically
    it covers both inflation and deflation periods.
    8

    TYPES OF UNSYSTEMATIC RISK

    1) Business Risk:
    Every corporate organization has its own objectives and goals and aims at a
    particular gross profit and operating income and also expects to provide a
    certain level of dividend income to its shareholders.

    2) Financial Risk:
    Financial risk in a company is associated with the method through which it
    plans its financial structure.
    9

    WHAT IS RETURN?

    • A return, also known as a financial


    return, in its simplest terms, is the
    money made or lost on an
    investment over some period of
    time.
    • A return can be expressed
    nominally as the change in dollar
    value of an investment over time.
    10

    RISK RETURN TRADE OFF

    • The tendency for potential risk to vary directly with


    potential return, so that the more risk involved, the
    greater the potential return, and vice versa.
    11
    12

    Risk-Return Tradeoff at the Portfolio Level

    That said, the risk-return tradeoff also exists at the portfolio level. For
    example, a portfolio composed of all equities presents both higher risk
    and higher potential returns.
    13

    Conclusion

    • High-risk does not necessarily translate into high returns always.


    • Income: If you are earning well, receiving bonuses, increments and
    career prospects look bright you may not mind taking higher risks.
    • Expenses: Your outgos influence the risk you can afford to take while
    investing.
    • Financial responsibilities: The number of dependents and the financial
    goals you are addressing such as children’s education, their wedding
    expenses, your retirement, etc.
    • Time-to- goal: This refers to how close you are before the envisioned
    financial goals befall—days, months or years.
    THANK YOU

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