DEFINITION of 'Capital Allocation Line  CAL'
A line created in a graph of all possible combinations of risky and riskfree assets. Also known as the "rewardtovariability ratio".
INVESTOPEDIA EXPLAINS 'Capital Allocation Line  CAL'
The graph displays to investors the return they can make by taking on a certain level of risk.
RELATED TERMS

Capital Accumulation
This refers to profits that a company uses to increase its capital ... 
Portfolio
A grouping of financial assets such as stocks, bonds and cash ... 
Expected Return
The amount one would anticipate receiving on an investment that ... 
Modern Portfolio Theory  MPT
A theory on how riskaverse investors can construct portfolios ... 
RiskReturn Tradeoff
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Risk
The chance that an investment's actual return will be different ...
RELATED FAQS

How accurate is the equity risk premium in evaluating a stock?
The equity risk premium can provide some guidance to investors in evaluating a stock, but it attempts to forecast the future ... Read Full Answer >> 
How do you calculate the geometric mean to assess portfolio performance?
The geometric mean is used to calculate the central tendency of a set of numbers. It is the average of the logarithmic values ... Read Full Answer >> 
What are the primary sources of market risk?
Market risk is the risk of loss due to the factors that affect an entire market or asset class. Market risk is also known ... Read Full Answer >> 
How does beta measure a stock's market risk?
Beta is a statistical measure of the volatility of a stock versus the overall market. It's generally used as both a measure ... Read Full Answer >> 
How does the risk of investing in the electronics sector compare to the broader market?
The risk of investing in the electronics sector closely approximates the risk of investing in the broader market. The electronics ... Read Full Answer >> 
How much of a diversified portfolio should be invested in the electronics sector?
The electronics sector tracks closely with the broader market, making it a cyclical sector with average volatility. Electronics ... Read Full Answer >>
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