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Diversification is about improving the reward-to-risk ratio.
Decreasing the denominator improves the ratio.

Beginner

Diversification is the concept of lowered risk when securities are held in a portfolio. Securities with low correlation, or co-movements, offer greater diversification benefits. The quantification of this lowered risk can be forecast by using portfolio weights and the risk measures found in a covariance matrix.

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False. The first part is true, the second is false

**Guy: ***How do you measure
*diversification
* when executing your daily trade lists?*

**Rex: ***By instinct. How much did you spend at
lunch today Guy? $6.73 or $6.74?*

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Keywords:

diversification

lower risk

low correlation

portfolio

investment

covariance matrix

modern portfolio theory