Loading...
CFA Level 1
Portfolio Management

Impact of Diversification on Portfolio Risk

Very Easy Portfolio Risk And Return Portfolio Diversification

In the context of portfolio management, diversification is a fundamental concept used to manage investment risk. By holding a variety of investments, an investor aims to reduce the overall risk of the portfolio without necessarily sacrificing returns. This concept relies on the assumption that different assets are not perfectly correlated with one another.

Which of the following statements best describes the effect of diversification on a portfolio's risk?

Hint

Submitted3.2K
Correct3.0K
% Correct96%