The amount of a share's risk that is diversified away:

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The amount of a share's risk that is diversified away depends on the portfolio that you add it to. This is because the diversification benefit of adding a share to a portfolio depends on the correlation of that share's return with the returns of the other assets in the portfolio. If the share's return is highly correlated with the returns of the other assets in the portfolio, then little diversification benefit can be achieved. On the other hand, if the share's return is negatively correlated with the returns of the other assets in the portfolio, then a considerable amount of diversification benefit can be achieved. Hence, the amount of risk that can be diversified away is dependent on the portfolio that it is combined with.

The Amount of a Share's Risk That Is Diversified Away