Diversification increases when ________ decreases.
A)variability
B)return
C)risk
D)A and C
E)all of the above

Question

Quizplus · Accepted Answer

Diversification increases when both variability (A) and risk (C) decrease. By spreading investments across different assets and sectors, the overall risk of the portfolio can be reduced. Additionally, having a diversified portfolio can reduce the variability of returns, as the performance of different investments may offset each other. Therefore, D is the best answer choice because it correctly identifies both factors that impact diversification.

Diversification Increases When ________ Decreases