What is the 'Capital Allocation Line  CAL'
The capital allocation line (CAL) is a line created in a graph of all possible combinations of risky and riskfree assets. Also known as the "rewardtovariability ratio".
Next Up
BREAKING DOWN 'Capital Allocation Line  CAL'
The graph displays to investors the return they can make by taking on a certain level of risk.
RELATED TERMS

Line Graph
A graph that measures change over time by plotting individual ... 
RiskFree Return
The theoretical rate of return attributed to an investment with ... 
Risk Premium
The return in excess of the riskfree rate of return that an ... 
Security Market Line  SML
A line that graphs the systematic, or market, risk versus return ... 
Daily Chart
A line graph that displays the intraday movements of a given ... 
RiskNeutral Measures
A theoretical measure of probability derived from the assumption ...
Related Articles

Options & Futures
Options Risk Graphs: Visualizing Profit Potential
With a single diagram, you can see how price, time and volatility affect potential gains. 
Investing
RiskFree Rate of Return
The riskfree rate of return is the theoretical rate of return of an investment with zero risk. The riskfree rate represents the interest an investor would expect from an absolutely riskfree ... 
Options & Futures
How Risk Free Is The RiskFree Rate Of Return?
This rate is rarely questioned  unless the economy falls into disarray. 
Stock Analysis
Hey Facebook  What's A Graph Search?
Facebook announced its graph search in underwhelming fashion. It might look to Apple for tips on making its next announcement. 
Bonds & Fixed Income
Understanding The Sharpe Ratio
This simple ratio will tell you how much that extra return is really worth. 
Investing Basics
6 Asset Allocation Strategies That Work
An asset mix should reflect an investorâ€™s current goals. Here are a few strategies for establishing the right allocation. 
Options & Futures
6 Asset Allocation Strategies That Work
Your portfolio's asset mix is a key factor in whether it's profitable. Find out how to get this delicate balance right. 
Trading Strategies
Risk Management Techniques For Shorting Call Options (IBM)
Shorting covered calls is a popular options trade strategy. Here are the methods to mitigate the risk/loss and enhance profits for selling covered calls 
Investing Basics
Choose Your Own Asset Allocation Adventure
There are many strategies to help balance your portfolio. Here are a few to get you started. 
Personal Finance
RiskFree & 20% Return? More Like 100% Scam
An investment that promises a riskfree return of 20% is 100% likely to be a scam.
RELATED FAQS

How is it possible for a rate to be entirely riskfree?
Find out whether there really is such a thing as a riskfree rate of return, and learn why taking the idea of riskfree rates ... Read Answer >> 
What is the correlation between equity risk premium and risk?
Learn about the relationship between the riskfree rate of return and the equity risk premium, and understand how the riskfree ... Read Answer >> 
How is the riskfree rate of interest used to calculate other types of interest rates ...
Learn how the riskfree rate is used to compare the yields on bonds, and understand how Tbills are used as a proxy for the ... Read Answer >> 
How is the riskfree rate determined when calculating market risk premium?
Learn how the riskfree rate is used in the calculation of the market risk premium, and understand why Tbills provide the ... Read Answer >> 
How accurate is the equity risk premium in evaluating a stock?
Learn about the drawbacks of using the equity risk premium to evaluate a stock, and understand how it is calculated using ... Read Answer >> 
What nations other than the U.S. have riskfree interest rates?
Find out which countries have riskfree rates of returns. This is typically the yield on a 3month note, and it can be negative ... Read Answer >>