Editing Capital asset pricing model (section)

==Efficient frontier==
{{Main|Efficient frontier}}
[[Image:markowitz frontier.jpg|thumb|269px|The (Markowitz) [[efficient frontier]]. CAL stands for the [[capital allocation line]].]]
The CAPM assumes that the risk-return profile of a portfolio can be optimized—an optimal portfolio displays the lowest possible level of risk for its level of return. Additionally, since each additional asset introduced into a portfolio further diversifies the portfolio, the optimal portfolio must comprise every asset, (assuming no trading costs) with each asset value-weighted to achieve the above (assuming that any asset is [[infinite divisibility|infinitely divisible]]). All such optimal portfolios, i.e., one for each level of return, comprise the efficient frontier.

Because the unsystematic risk is [[Diversification (finance)|diversifiable]], the total risk of a portfolio can be viewed as [[Beta (finance)|beta]].