Based on the previous results, we can say that, as we include more
4 q9 ?6 W7 r" b/ b s) N' pand more assets into our portfolio, the ”variance risk” can be# Q, s5 |8 h7 W
diversified away, whereas the ”covariance risk” cannot.
/ R- U) }9 g! g% {3 r8 c3 g$ o' [In practice, we also observe similar results. As we include more% z- ]$ q. i( |$ d/ i, I: _
assets in our portfolio, the portfolio return variance firstly7 }6 O7 v. A+ }1 J& |! P, y- y' |
decreases, and then approach to a particular level, and will not
* C. g% a$ b5 a$ W8 R Dreach zero.
& j! v6 Q# {4 v! e5 h8 m2 `( i |