Based on the previous results, we can say that, as we include more
' e: C( P8 S. w$ xand more assets into our portfolio, the ”variance risk” can be
" L2 _) k `( {9 k1 }diversified away, whereas the ”covariance risk” cannot.
8 J2 s& {* ~2 Q3 i! H" L+ @$ I# K EIn practice, we also observe similar results. As we include more0 W, I* m$ p: L M
assets in our portfolio, the portfolio return variance firstly3 j( w. Y/ e( h7 f4 X
decreases, and then approach to a particular level, and will not
8 j2 H: d# `6 N8 }- treach zero.; y9 e( ~+ i+ _0 P. F
|