Security Market Line (SML)

It is the graphical representation of risks that the investors expect to gain through risks.  

It involves the term beta which is used to show the correlated volatility against the benchmark (like a market index) and the term premium is used to indicate the compensation the traders are expecting to get.

It can be used for determining diversification for investment solutions and to compare two similar securities offering almost the same returns. It can be used in the process of investing in stocks online.

The graph can be used to establish the risk and return to compare the most popular hedge funds.

Beta is used in CAPM to measure the systematic risk which cannot be evaded by using the method of diversification.