The reason why a fully-diversified portfolio does not have zero risk is that some risk is:
A) diversifiable.
B) unrelated.
C) not correlated.
D) nondiversifiable.
E) intrinsic.

Question

Quizplus · Accepted Answer

The risk that cannot be diversified away is called nondiversifiable or systematic risk. This type of risk is inherent in the overall market or economy and affects all investments, regardless of how diversified the portfolio is. Therefore, a fully-diversified portfolio can still have non-zero risk due to nondiversifiable risk factors.

The Reason Why a Fully-Diversified Portfolio Does Not Have Zero