Based on the previous results, we can say that, as we include more: L+ w, w Z( u" D& m# }$ s
and more assets into our portfolio, the ”variance risk” can be: T3 p% B( r0 Z* C# N
diversified away, whereas the ”covariance risk” cannot.
3 o& u! e5 s7 o& k8 SIn practice, we also observe similar results. As we include more
* R* f: \& y7 H: t: d8 g2 _ Oassets in our portfolio, the portfolio return variance firstly
: A/ L- Z1 |# K: @; S7 R4 P% Ddecreases, and then approach to a particular level, and will not
' \: m& _8 v& g8 m( w% H: l6 W: V& [reach zero.; A0 f# X- F7 N7 T
|