Two risk assets can be combined to lower the overall risk of a portfolio.This principle is commonly referred to as
A)blending
B)asset allocation
C)diversification
D)portfolio segmentation
E)none of the above

Question

Quizplus · Accepted Answer

Diversification is the principle of combining different asset classes or securities in a portfolio to lower overall risk. By diversifying, an investor can reduce the impact of any one particular investment on their portfolio’s performance. Blending and portfolio segmentation are not common terms used in finance, and asset allocation is the process of determining the mix of assets to hold in a portfolio, which may or may not involve diversification.

Two Risk Assets Can Be Combined to Lower the Overall