Based on the previous results, we can say that, as we include more
6 f9 L. w. c: V1 W7 yand more assets into our portfolio, the ”variance risk” can be+ e, W# P6 n& i4 o2 }2 D5 s; t, Y; x
diversified away, whereas the ”covariance risk” cannot.
# H$ Y3 d9 K) m- A4 BIn practice, we also observe similar results. As we include more
3 \6 O x. Z' ^ n3 M; ~: G1 c, w- vassets in our portfolio, the portfolio return variance firstly
6 J9 ?9 D* y* V. E: j* Hdecreases, and then approach to a particular level, and will not A$ Q- J# l7 n4 W0 P7 `* d& V
reach zero.
# Q# S4 {: X I- B9 C; A# o |