Which of the following is correct?
A)Diversifiable risk, which is measured by the stock's beta, can be lowered by adding more stocks to the portfolio in which the stock is held.
B)Diversifiable risk, which is measured by the standard deviation, can be lowered by adding more stocks to the portfolio in which the stock is held.
C)Systematic risk, which is measured by the stock's beta, cannot be diversified away by adding more stocks to the portfolio in which the stock is held.
D)Diversifiable risk, which is measured by the stock's expected return, can be lowered by adding more stocks to the portfolio in which the stock is held.

Question

Quizplus · Accepted Answer

Systematic risk, measured by beta, represents market-wide risks that cannot be eliminated through diversification. Diversifiable risk, on the other hand, is specific to individual stocks and can be reduced by adding more stocks to a portfolio.

Which of the Following Is Correct