Principle of diversification

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.
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Raed al Khalaf, chairman of Al Raed Fresh Foods, said: "We look forward to expanding our business and investing in a wider range of Philippine food products based on the principle of diversification of resources to meet the needs of the Qatari market and the Filipino community in Qatar.
Both of these mainstream views, as I will refer to them--the traditional view that matter is the principle of diversification and the view that form is the principle of diversification--agree that numerical diversification is underived at some level in the order of composition: the level of matter for the traditional view; the level of form for the other view.
Dela Cruz said the project is a rice-based enterprise with the principle of diversification (maximum use of farm space), intensification (maximum use of time), and integration (farm resource and zero-waste management).
For example, the bank would be unlikely to put nearly $5 million into an investment without the board's approval, because that's too large a sum to place in any one investment, according to the principle of diversification, Levear said.
The principle of diversification applies to managing a business as it does to managing a portfolio.
The affects of an economic recession and the recent Arab Spring which has led to political and social changes in the region, with the resulting fluctuating oil prices has led many in the region to realise the importance of enhancing the principle of diversification of wealth sources so as to meet the requirements of the GCC economic integration and growth.
The analysis of diversification highlighting the principle of diversification and safety first initially was applied to domestic assets alone until Grubel (1968), Levy and Sarnat (1970, 1979), Solnik (1974), Losq (1979), Vaubel (1979), and Friend and Losq (1979), among others, brought portfolio structure into the setting of international markets.
Roy (1952), in a parallel examination of the principle of diversification, introduces the notion of disaster and the concept of safety first.
The principle of diversification is still working to cushion a part of the decline, but not to the same degree that it did five or six or seven years ago," Scudder said.
In addition, they understand the principle of diversification as a means to reduce portfolio risk.
The principle of diversification is to spread your investments, and therefore your risk, by investing in several industries, such as financial, health care and technology.
Its philosophy is based on the core principle of diversification of risk, implemented over a long-term investment horizon.
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