Principle of diversification

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Principle of diversification

That portfolios of different sorts of assets differently correlated with one another will have negligible unsystematic risk. In other words, unsystematic risks disappear in diversified portfolios, and only systematic risks persist, those related to particular assets.

Principle of Diversification

A principle of investing stating that a portfolio containing many different assets and kinds of assets carries lower risk than a portfolio with only a few. The principle of diversification states that unsystemic risk may be alleviated through diversification, but systemic risk is more difficult to reduce. That is, the risk associated with a single investment or type of investment may be offset by the risk of another investment or type of investment. See also: Diversification.
References in periodicals archive ?
We will provide with gas not only to the population and industry of Turkmenistan but will also export the gas in accordance with our diversification principle.
Doherty examines insurance and hedging techniques, but most important, he examines pre- and post-loss financing under different financing alternatives, contingent financing techniques, and risk-financing applications of the diversification principle.
This could involve drawing on elements of behavioral finance, scenario analysis, and deeper diversification principles to help clients understand, for example, the actual dollar impact of a confluence of events like loss of income and unexpected market losses.
Having huge oil and gas resources and intensively developing infrastructure of the national fuel and energy sector, Turkmenistan is implementing its energy policy built upon diversification principles, President Berdymukhamedov said.
The IRC should complete the issuance of new instructions strengthening corporate governance and internal controls (of the insurance companies), setting out sound diversification principles for investment policies, and introducing a code of market conduct for both insurance companies and intermediaries," it added.
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