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Minimum-variance portfolio
Also called global minimum-variance portfolio. A CFA term, defined in plain English with the distinction examiners test.
What it means
The combination of risky assets with the lowest possible variance. It marks the leftmost point of the efficient frontier; portfolios below it on the curve are dominated.
The exam angle
The lower the correlation, the further its risk falls below that of the less risky asset.
Where it appears in the syllabus
- Quantitative MethodsCFA Level I · exam weight 11–14% · Returns and benchmarks, time value, distributions, portfolio maths, regression.
- Portfolio ConstructionCFA Level I · exam weight 8–12% · Risk and return, the CAPM, IPS construction, behavioural biases.
Related terms
- AlphaReturn in excess of what the asset’s risk exposures would predict.
- Capital market lineThe capital allocation line that runs from the risk-free asset to the market portfolio, the steepest available.
- CorrelationCovariance divided by the product of the two standard deviations, giving a unit-free number between −1 and +1.
- CovarianceA measure of how two variables move together.
- Efficient frontierThe set of portfolios offering the highest expected return for each level of risk.
- Standard deviationThe square root of variance, in the same units as the data.
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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