Security analysis related to the analysis of individual securities within the framework of return and risk. Whereas, Portfolio analysis makes an analysis of securities in the combined form.

**PORTFOLIO ANALYSIS**

Security
analysis related to the analysis of individual securities within the framework
of return and risk. Whereas, Portfolio analysis makes an analysis of securities
in the combined form.

The
portfolio analysis considers the determination of future risk and return in
holding various blends of individual securities. Portfolio expected return is a
weighted average of the expected return of individual securities but portfolio
variance can be something less than a weighted average of security variances.

**Returns**

The
expected return of a portfolio depends on the expected return of each of the
security contained in the portfolio. It also seems logical that the amounts
invested in each security should be important. Indeed, this is the case. The
example of a portfolio with three securities shown in Table-1A illustrates this
point. The expected holding period value-relative for the portfolio is clearly:

Rs.23, 100 / Rs.20, 000 = 1.155

giving an expected holding period return
of 15.50%.

**Risk**

The
probability of loss is the essence of risk. A useful measure of risk takes into
account both the probability of various possible bad outcomes and their
associated magnitudes. Instead of measuring the probability of a number of
different possible outcomes, the measure of risk should somehow estimate the
extent to which the actual outcome is likely to diverge from the expected. Two
measures used for this purpose are the mean absolute deviation and the standard
deviation.

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Business Science : Security Analysis and Portfolio Management : Portfolio Analysis : Portfolio Analysis |

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