CML is a graphical representation that tells the rate at which the securities are providing a return. SML tells the relation between the required rate of return of security as a function of the non-diversifiable risk. https://efinancemanagement.com/investment-decisions/sml-vs-cml

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eFinanceManagement.com
https://efinancemanagement.com/investment-decisions/sml-vs-cml
SML vs CML

2. 1. Meaning
2. Differences
3. Reference
Content

3. CML (Capital Market Line):
It is a graphical representation that tells the rate at which the securities are providing a return.
SML (Security Market Line):
It tells the relation between the required rate of return of security as a function of the non-diversifiable risk.
Meaning

4. 1. Portfolios:
SML defines both functioning and non-functioning portfolios. CML defines only functioning or efficient portfolios.
2. Functioning:
SML is known to be less efficient than CML.
3. Objective:
SML’s objective is to illustrate all security factors. CML describes only the market portfolios and risk-free investments.
4. How risk is measured?
SML uses the beta coefficient to calculate the risk. CML, on the other hand, uses standard deviation to calculate the risk.
5. Graph:
In SML, the Y-axis represents the return of securities, while X-axis shows the beta of security. In CML,
Y-axis represents the expected return of the portfolio while the X-axis indicates the standard deviation
of the portfolio.
Differences

5. 6. Portfolio of individual security
SML determines all the security-related factors or the risk or return for individual stocks. CML determines market
portfolio and risk-free assets, or the risk or return for efficient portfolios.
7. Superior:
CML is superior to SML.
Differences

6. Reference
To know more about it, click on the link given below:
https://efinancemanagement.com/investment-decisions/sml-vs-cml