Course 07

Risk and return

Learning how to evaluate an investment

What you will learn

• Calculate and interpret a simple return and an average return over a period.
• Understand volatility, variance and standard deviation as measures of how spread out returns are.
• Tell specific risk apart from systematic risk.
• Explain the role of correlation in the risk of a portfolio.
• Interpret the beta of an asset relative to a reference market.
• Understand the principle of a risk-adjusted performance measure, especially the Sharpe ratio.
• Present a careful analysis that states the assumptions and the limits of the indicators.

• 1. Understanding the risk–return pair
• 2. Measuring return and volatility
• 3. The different sources of risk
• 4. Correlation, diversification and portfolio risk
• 5. Beta and market sensitivity
• 6. Risk-adjusted performance and an analysis method

49 €