We can reduce volatility by investing in less than perfectly correlated assets through diversification because the expected return of a portfolio is the weighted average of the expected returns of its shares, but the volatility of a portfolio

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The volatility of a portfolio is not the weighted average of the volatility of individual shares because the assets may not move perfectly in tandem. By investing in a diversified portfolio of assets that are less than perfectly correlated, we can reduce the overall volatility of the portfolio. This is due to the fact that some assets may have positive returns while others may have negative returns, and they may not move in the same direction at the same time. Therefore, the overall volatility of the portfolio will be less than the weighted average of the volatility of the individual shares.

We Can Reduce Volatility by Investing in Less Than Perfectly