Based on the previous results, we can say that, as we include more0 p6 E7 C4 Y; K; L' H& W
and more assets into our portfolio, the ”variance risk” can be
" l1 o7 h4 R9 W! {5 D% Ldiversified away, whereas the ”covariance risk” cannot.
+ j9 i- K4 p, b" r4 ~6 ?5 SIn practice, we also observe similar results. As we include more( F! r6 y; {* Y; N, x
assets in our portfolio, the portfolio return variance firstly0 D' m4 _+ I7 w
decreases, and then approach to a particular level, and will not2 F3 Z- Y% ~" T
reach zero.
% k7 ~0 ]" N3 Q5 ~$ w |