Based on the previous results, we can say that, as we include more
/ J, H" N/ k0 F0 T% f: l0 Wand more assets into our portfolio, the ”variance risk” can be0 C8 H/ V1 S: I% e" U+ e, B2 K
diversified away, whereas the ”covariance risk” cannot.8 W9 g: s# Z* X2 _' k# w
In practice, we also observe similar results. As we include more
( |1 ^$ t# f( f8 i9 L" ^" hassets in our portfolio, the portfolio return variance firstly
7 R9 u$ ~: X) b5 z7 n- O. jdecreases, and then approach to a particular level, and will not
3 g' d1 W, m) O b) |7 s+ `reach zero.
# K2 n$ O1 G9 z2 n7 S" k% I |