Risk vs. return is a tradeoff inherent in all financial investments. Generally, assets with higher return are associated with higher risk.
The risk/return chart is useful to visualize the risk/return tradeoff of the portfolio and its positions:
- The vertical axis is the total return for the selected period. If the period is 1 year or more, annualized total return is used.
- The horizontal axis is risk, measured as the annualized standard deviation of monthly returns (for periods of 1 year or more) or of weekly returns (for shorter periods) .
Using the menu in the green option box, you can select to show Assets (the portfolio assets), Indexes (a selection of major financial indexes) or Basic (only the portfolio).