Principle of diversification


 

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Principle of diversification

That portfolios of different sorts of assets differently correlated with one another will have negligible unsystematic risk. In other words, unsystematic risks disappear in diversified portfolios, and only systematic risks persist, those related to particular assets.



Principle of diversification

Similar Matches

Liquidity diversification

Liquidity diversification

Investing in a variety of maturities to reduce the price risk to which holding long bonds exposes the investor.


Currency diversification

Currency diversification

Using more than one currency as an investing or financing strategy. Exposure to a diversified currency portfolio typically entails less exchange rate risk than if all the portfolio exposure were in a single foreign currency.


Unique Diversification Benefit

Unique Diversification Benefit

Reduction in the likelihood of financial distress for a conglomerate firm that comes with its diversified investments.


Efficient diversification

Efficient diversification

The organizing principle of modern portfolio theory, which maintains that any risk-averse investor will search for the highest expected return for any particular level of portfolio risk.


Sector diversification

Sector diversification

Constituting of a portfolio of stocks of companies in each major industry group.


Further Suggestions

Markowitz diversification
Diversification cone
Diversification
Naive diversification
Cone of diversification
Indirect diversification benefits
diversification
International diversification


 
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