Based on the previous results, we can say that, as we include more' K' \6 S. g5 \% x) d
and more assets into our portfolio, the ”variance risk” can be1 h% B3 s; M* \5 R4 V+ e' Z% ?9 b
diversified away, whereas the ”covariance risk” cannot.
- R8 O2 |7 b3 l; z5 r8 k+ _! ?" mIn practice, we also observe similar results. As we include more
9 p- T D0 E0 P9 ]$ Dassets in our portfolio, the portfolio return variance firstly
2 ]' `+ C/ x' Q+ F( j8 xdecreases, and then approach to a particular level, and will not
) Q, U4 _' N# L& F' I" |reach zero.
6 u$ C/ e( Y2 w3 f. l4 U1 ? |