________ will not systematically affect the portfolio return, but it will reduce the variability (standard deviation) of return with this variability reduced when there is ________ among security returns.

Question

Quizplus · Accepted Answer

Diversification refers to investing in a variety of assets or securities, which helps to reduce the overall risk of the portfolio without sacrificing returns. This means that diversification will not systematically affect the portfolio return, but it will reduce the variability of returns. The reduction in variability is more effective when there is less correlation among security returns, which is achieved through diversification. Therefore, the best choice is C, where diversification is paired with less correlation among security returns.

________ Will Not Systematically Affect the Portfolio Return, but It