Financial Analysis. Lesson 4. Portfolio Management and Asset Allocation
<ol>
<li>Asset allocation involves distributing investments across different asset classes.
</li>
<li>Diversification reduces portfolio risk by investing in varied asset categories.
</li>
<li>Risk tolerance defines an investor's comfort level with potential losses.
</li>
<li>Expected return is the anticipated profit based on historical data.
</li>
<li>Efficient frontier shows the optimal return for a given level of risk.
</li>
<li>Modern portfolio theory (MPT) aims to maximize returns for specific risks.
</li>
<li>Rebalancing periodically adjusts portfolio allocations to maintain desired proportions.
</li>
<li>Tactical asset allocation involves short-term adjustments based on market opportunities.
</li>
<li>Strategic asset allocation sets long-term target allocations, reviewed periodically.
</li>
<li>Correlation matrix analyzes relationships between asset returns within a portfolio.
</li>
</ol>
<hr />
Technical Examples:
<ol>
<li>Using MPT, analysts construct portfolios that optimize risk-return trade-offs.
</li>
<li>Efficient frontier analysis helps identify the best risk-return combinations.
</li>
<li>Tactical asset allocation can increase returns during favorable market conditions.
</li>
</ol>

**Financial Analysis. Lesson 4. Portfolio Management and Asset Allocation**

1. **Asset allocation** involves distributing investments across different asset classes.
    
2. **Diversification** reduces portfolio risk by investing in varied asset categories.
    
3. **Risk tolerance** defines an investor's comfort level with potential losses.
    
4. **Expected return** is the anticipated profit based on historical data.
    
5. **Efficient frontier** shows the optimal return for a given level of risk.
    
6. **Modern portfolio theory (MPT)** aims to maximize returns for specific risks.
    
7. **Rebalancing** periodically adjusts portfolio allocations to maintain desired proportions.
    
8. **Tactical asset allocation** involves short-term adjustments based on market opportunities.
    
9. **Strategic asset allocation** sets long-term target allocations, reviewed periodically.
    
10. **Correlation matrix** analyzes relationships between asset returns within a portfolio.
    

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**Technical Examples:**

1. Using **MPT**, analysts construct portfolios that optimize risk-return trade-offs.
    
2. **Efficient frontier** analysis helps identify the best risk-return combinations.
    
3. **Tactical asset allocation** can increase returns during favorable market conditions.