# Key Concepts * **Expected Return:**\ The anticipated return of a portfolio is based on the weighted average of individual asset returns. * **Risk (Variance/Standard Deviation):**\ Measures the portfolio’s return volatility. A higher variance indicates greater uncertainty and potential for large fluctuations. * **Correlation:**\ The degree to which two assets move in relation to each other. Negative or low correlations between assets reduce overall portfolio risk. * **Efficient Frontier:**\ A curve representing the set of optimal portfolios offering the highest expected return for a given level of risk. Portfolios below the frontier are suboptimal, while those on the curve maximize return for their risk level. * **Sharpe Ratio:**\ A measure of risk-adjusted return, calculated as the portfolio's return above the risk-free rate divided by its standard deviation. Higher Sharpe ratios indicate better risk-return trade-offs. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.frnx.ai/explainer-modern-portfolio-theory-mpt/key-concepts.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.