In the context of portfolio management, what does the Markowitz model minimize?

The Markowitz model, also known as the mean-variance optimization model, focuses on the trade-off between risk and return in portfolio management. It seeks to minimize the risk associated with a portfolio while achieving a specified level of expected return. This approach allows investors to construct efficient portfolios—combinations of assets that offer the maximum expected return for a given level of risk or the minimum risk for a desired level of expected return.

By analyzing the correlation and variance of different assets, the Markowitz model helps investors make informed decisions about how to allocate their capital across various investments. This is a fundamental principle in modern portfolio theory, where the goal is to optimize the risk-return profile of an investment portfolio, hence minimizing risk for a given expected return.