Based on the previous results, we can say that, as we include more" ~2 y$ ~' f1 \* O
and more assets into our portfolio, the ”variance risk” can be
1 L* C2 h0 x0 ndiversified away, whereas the ”covariance risk” cannot.
& N# m, V/ ~) z1 F) pIn practice, we also observe similar results. As we include more
. O$ {. o( u) a$ U6 _1 uassets in our portfolio, the portfolio return variance firstly5 e$ W+ `7 T5 i7 z( @/ P
decreases, and then approach to a particular level, and will not
' P5 [0 k) n; l7 N/ D7 e) mreach zero.
+ Y/ O4 i# {* ]; ~( C |