As we increase the number of stocks in a portfolio,the standard deviation of returns of the portfolio

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As we increase the number of stocks in a portfolio, the diversification effect increases, which tends to decrease the standard deviation of returns of the portfolio. This is because the risks associated with individual stocks are not perfectly correlated with each other, so adding more stocks helps to reduce the overall risk of the portfolio. However, this effect tends to level off beyond a certain point, and there may be other factors such as transaction costs and liquidity constraints that limit the benefits of adding more stocks to the portfolio.

As We Increase the Number of Stocks in a Portfolio,the