Based on the previous results, we can say that, as we include more
( T( ?' A ]: X7 d+ s* N/ Hand more assets into our portfolio, the ”variance risk” can be; y+ r& h! L1 p# r) X% y% |! z
diversified away, whereas the ”covariance risk” cannot.9 }7 P/ F! O3 Y
In practice, we also observe similar results. As we include more
, N6 [ j: ]$ @assets in our portfolio, the portfolio return variance firstly$ `- q% K' Z/ s$ I, _. |; m
decreases, and then approach to a particular level, and will not
5 Z: j. m, c/ v. r( C7 ]reach zero.
! q0 ~( I+ \9 J" h |