**The analysis of historical financial market data can reveal interesting patterns and insights. This information can help to build a strong portfolio.**
When creating a portfolio, two key variables play a significant role: diversification and the risk-return ratio.
The diversification of a portfolio can be easily implemented by adding different assets from various sectors. However, many retail investors overlook the evaluation of the risk-return ratio.
In this guide, we will explain how to apply and use the Capital Asset Pricing Model (CAPM). The CAPM is a theoretical model used to analyze the risk and return of securities. The model’s goal is to determine expected returns based on the risk involved.
We will discuss the following points:
* **Introduction to the Capital Asset Pricing Model**
* **Difference between systematic and unsystematic risk**
* **CAPM Calculation with a simple example**
* **Advantages and disadvantages of the CAPM**
* **Example with Python**
* Technical requirements
* Download stock market data with OpenBB
* Exploratory analysis
* Application of the CAPM
* **Conclusion**
The [full article](https://steady.page/en/tinztwins-hub/posts/96c185af-b3be-423b-89c0-21193b8c7ee9) is available in our members-only area.
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