Based on the previous results, we can say that, as we include more. h, |! v e k. |$ q* u
and more assets into our portfolio, the ”variance risk” can be" C7 ^# t% R2 x# D+ y) U7 J/ J
diversified away, whereas the ”covariance risk” cannot.
2 U v5 y' m/ K: ]2 B7 WIn practice, we also observe similar results. As we include more
9 _/ r, ~0 w+ k2 A3 kassets in our portfolio, the portfolio return variance firstly) Q% s4 q. X7 D8 j0 T1 s- e1 w
decreases, and then approach to a particular level, and will not* f3 b7 v, K) j% K/ g) f A- {. q/ ?
reach zero.* ]0 \/ w& }/ {6 N( L3 k
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