Some securities have returns that are predictable and stable, while others are variable and unknown to most. These concepts often dictate the level of risk that a security will have. It is assumed that investors prefer to maximize return, while minimizing risk. The result of this assumption is that stocks with higher returns are considered more risky.
Investors are in a constant struggle to trade find a balance between the two.
Risk ans return are two concepts that are at the heart of determining an investors optimal portfolio of securities. Theoretical measures can be used to assess risk. Variances and standard deviations are often used to determine the volatility of a stock. You can think of a stock as having a mean or average price. The standard deviation will then measure the how much the stocks price deviates from it's mean.