What is portfolio optimization, and how can it be used to maximize returns while minimizing risk?

Portfolio optimization is the process of constructing a portfolio of assets that maximizes expected returns while minimizing risk. The goal of portfolio optimization is to find the optimal combination of assets that provide the highest expected returns for a given level of risk, or the lowest level of risk for a given level of expected returns. Portfolio optimization is based on the concept of diversification, which means investing in a variety of assets to reduce the overall risk of the portfolio. Diversification works because different assets tend to have different risk and return characteristics, so by combining assets with low correlation, t....