Capital Allocation Line
A Capital Allocation Line (CAL) is the set of portfolios formed by mixing a risk-free asset with a single risky portfolio. It shows how expected return changes with risk as the allocation to the risky portfolio varies.
Example: An analyst notes that by varying the weight on a selected risky portfolio versus cash, the overall portfolio moves along a CAL, yielding higher expected return at higher risk as the allocation to the risky portfolio grows.
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