Abstract: Based on the theory ofE-V(expected value-variance) and the mathematical model of the efficient frontier of portfolios, the expected profit and variance of a portfolio including three securities under the different allocation proportions of capital are discussed, and the graphic expressions of lines linking the tangent points of isomean lines and isovariance curves under different conditions are obtained. The research shows that the efficient frontier is composed of a series of parabolic segments connected each other in anE-Vplane and the risk of a compound portfolio is diversified because the variance of the compound portfolio is less than that of a single portfolio with the same variance.