Based on the previous results, we can say that, as we include more( V |. U. Q. ~; n3 a3 X- V& M
and more assets into our portfolio, the ”variance risk” can be
9 P1 g! @& o, p+ ^) |0 Udiversified away, whereas the ”covariance risk” cannot.; i, {8 P7 w/ Y) _6 p
In practice, we also observe similar results. As we include more
8 J8 }. r5 \; V( [& o$ I) G& ~assets in our portfolio, the portfolio return variance firstly/ @) |" f4 Q1 r% t0 E) H3 v* K* c
decreases, and then approach to a particular level, and will not
5 |2 H% Q# C( P* f/ }# j2 Nreach zero.8 i x8 `+ ]- Q" t9 W
|