Based on the mean-variance analysis,the risk of a portfolio is defined as:

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According to mean-variance analysis, the risk of a portfolio is defined as the variance of its return. This means that the risk of a portfolio is measured by the degree of dispersion of its expected returns from the expected return of the portfolio. Standard deviation is another measure of dispersion but it does not represent risk in this context. The sum of risks of individual stocks is not a valid measure of portfolio risk since diversification can reduce the overall risk of the portfolio. The portfolio-weighted average of the risks of individual stocks is a component of portfolio risk but not the complete measure of portfolio risk.

Based on the Mean-Variance Analysis,the Risk of a Portfolio Is