Security analysis is used to determine correct value of a security in the marketplace. It is one of the three steps of forming portfolios of securities. The selection of a portfolio of securities can be thought of as a multi-step process. The first step consists of studying the economic and social environment and the characteristics of individual companies in order to produce a set of forecasts of individual company variables. The second step consists of turning these forecasts of fundamental data about the corporation and its environment into a set of forecasts of security prices and/or returns and risk measures. This step is often called the valuation process. The third and last step consists of forming portfolios of securities based on the forecast of security returns.