Which of the following statements is correct with regards to diversification?
A) Diversifying reduces the return of the portfolio.
B) Diversifying reduces the market risk of the portfolio.
C) Diversifying reduces the dollar return of the portfolio.
D) None of these choices are correct.

Question

Quizplus · Accepted Answer

Diversification primarily reduces unsystematic risk, not market risk (systematic risk), and does not inherently reduce the return or dollar return of a portfolio.

Which of the Following Statements Is Correct with Regards to Diversification