Based on the previous results, we can say that, as we include more* d# e7 `' z$ E: f
and more assets into our portfolio, the ”variance risk” can be
+ ?8 H) i5 x h$ s1 S( G' Sdiversified away, whereas the ”covariance risk” cannot.
5 A l) y. q5 L& T! `In practice, we also observe similar results. As we include more+ R0 m$ Q. r6 R+ P J/ V
assets in our portfolio, the portfolio return variance firstly1 i! h0 [% g3 e% a
decreases, and then approach to a particular level, and will not1 K. C3 J2 n% V* ~) M8 Q3 O! X
reach zero.
* g4 T" }' M4 R0 I' ?' e# U |