Weighted-Average Expected Return

This expected return calculator applies the standard portfolio-theory formula: E(R) = Σ pᵢ × rᵢ. Each scenario's return is weighted by its probability and summed. Probabilities must total 100% — the calculator enforces this before computing.

Measuring Risk

Expected return alone ignores dispersion. The standard deviation of outcomes — the square root of the probability-weighted squared deviations from the mean — quantifies how far actual results may land from the expectation. A higher standard deviation means a wider range of possible outcomes.

Using the Result

Compare expected returns across investments only after adjusting for risk: two investments with the same expected return but different standard deviations have different utility. Pair this with your risk tolerance and time horizon.