In a portfolio, risk is evaluated in a different way than with an individual project. In evaluating portfolio risk we

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In evaluating portfolio risk, we need to consider the impact of a given project on the overall risk of the firm. This involves looking at the correlation between the returns of different projects in the portfolio and considering how they interact with each other. A risky investment may not necessarily create a portfolio with less risk if the investments are highly correlated and all have the potential to fail at the same time. Ensuring all the projects in the portfolio are positively correlated is not necessary or desirable, as diversification and including negatively correlated investments can help reduce overall portfolio risk.

In a Portfolio, Risk Is Evaluated in a Different Way