Based on the previous results, we can say that, as we include more
. R$ C5 G" h9 Eand more assets into our portfolio, the ”variance risk” can be
: V r$ |, m# Cdiversified away, whereas the ”covariance risk” cannot.
* f! i3 [+ m4 B/ e" ~" s; A" sIn practice, we also observe similar results. As we include more
& g: v2 q5 c, X5 R2 r3 @7 c9 Kassets in our portfolio, the portfolio return variance firstly1 _" R" L6 Z' q+ d( I
decreases, and then approach to a particular level, and will not
6 H: E6 f" q& T9 M; H& q- Yreach zero.( f% z4 l, m& s" u$ ]9 N
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