The research article discusses two approaches, one method is Islamic Financing and the other is conventional asset pricing model capital (CAPM). Using direct Musharakah, the Islamic financing method is applied over the conventional financing method by comparing them with each other. The comparison between the two approaches led to different results; Beta risk has been found to be lower on Islamic financing partnership-based investments compared to the conventional market. The risk lies in the share of financiers and others, but not in the risk-return ratio. There is a balance between the relative risk and the creditor's share, also in the article it is also discussed that Islamic financing is not based on the fixed and predetermined interest rate, prediction of future inflation and partnerships, which are based on the minimum risk with maximum return. Islamic financing is spreading at a growth rate of 23% per year and many Islamic banks and financial institutions operate worldwide. The main objective of this article is to establish the hypothetical framework, which discusses profit and loss sharing based on Islamic principles with interest-free partnership investment. According to the author, Islamic financing is based on the risk that both parties take. At the time of investment, regardless of whether agents have a shortage or surplus of resources, they must share the returns and risks of the investment they are making. The general concepts of Islamic financial instruments such as Mudarabah, Musharakah, Murabahah, Al-Salam and Al-Ijara are based on the Profit and Loss Sharing (PLS) mechanism. All these partnerships mentioned above are based on the agreed upon subsequent loss or...... middle of paper ......stock portfolio management, the implementation of an Islamic CAPM would ultimately lead to more satisfactory results that can potentially producing a generous income for the investor. Works Cited Hanif, M. and U. Bhatti, 2010. Validity of the CAPM: Evidence from KSE. European Journal of Economics, Finance & Administrative Sciences, issue 20, pages 148-161. Selim, T. H. (2008). An Islamic model of capital asset pricing. Humanomics, 24(2), 122-129. Hanif, Muhammad and Dar, Abubakar Javaid, Comparative Tests of Capital Asset Pricing Model (CAPM) and Shari'a Compliant Asset Pricing Model (SCAPM): Evidence from the Karachi Stock Exchange - Pakistan ( November 18, 2011). 4th South Asia International Conference (SAICON-2012), Pearl Contentental Hotel, Bhurban, Pakistan, 5-7 December 2012. Available on SSRN: http://ssrn.com/abstract=1961660 or http://dx.doi . org/10.2139/ssrn.1961660