Based on the previous results, we can say that, as we include more: {1 U; H* [7 t. F5 [: S" |! p( g1 S; k
and more assets into our portfolio, the ”variance risk” can be
; T2 i- ?( z, m& mdiversified away, whereas the ”covariance risk” cannot.2 \2 H# }) o" j2 [' K4 O
In practice, we also observe similar results. As we include more- E$ D( P, N0 E
assets in our portfolio, the portfolio return variance firstly5 ^5 C5 o: |/ V
decreases, and then approach to a particular level, and will not7 u$ s; J7 q W- p* B. \) g; Y; ^
reach zero.
( ?% x* Q1 g3 E |