An individual stock's diversifiable risk, which is measured by the stock's beta, can be lowered by adding more stocks to the portfolio in which the stock is held.

Question

Quizplus · Accepted Answer

Beta measures systematic risk, not diversifiable risk. Diversifiable risk can be reduced by adding more stocks to a portfolio, but beta remains unchanged as it reflects market risk.

An Individual Stock's Diversifiable Risk, Which Is Measured by the Stock's