Portfolio A contains only one security,while Portfolio B contains 100 securities.Because of diversification effects,we would expect Portfolio B to have the lower relevant risk,but it is possible for Portfolio A to be less risky.

Question

Quizplus · Accepted Answer

Diversification reduces unsystematic risk, but if Portfolio A's single security is inherently less volatile or risky than the securities in Portfolio B, then Portfolio A could indeed be less risky overall.

Portfolio a Contains Only One Security,while Portfolio B Contains 100