Horizontal Diversification

Horizontal Diversification

In risk management, the act or strategy of adding more investments of like kind to one's portfolio to hedge against the investments already in it. Ideally, this reduces the risk inherent in any one investment, and increases the possibility of making a profit, or at least avoiding a loss. That is, horizontal diversification involves investing in similar instruments. Examples include investing in several technology companies or in different types of bonds. Horizontal diversification may be as broad or as narrow as the investor chooses. In general, broader diversification equates to less risk and lower return. See also: Markowitz Portfolio Theory, Vertical diversification.
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References in periodicals archive ?
I have always advocated for vertical and horizontal diversification. By horizontal diversification I mean increasing the value chain of the oil and gas sector in Nigeria.
An example of that horizontal diversification emerged on Monday after the company unveiled its plan to develop a state-of-the-art range of CBD infused wound dressings.
The five wings of the group are proposed to be: Commercial fishing and boat building yard, seafood canning project, Oman Fisheries (parent), integrated value added plant, and horizontal diversification under Al Ameen Stores and Refrigeration Co.
They used vertical diversification to create linkages in the existing industries and horizontal diversification with an emphasis on exports and technological upgrade.
The IMF experts also suggested that successful strategies combine vertical diversification (in specific sectors) to create linkages in existing industries, and horizontal diversification (across sectors) beyond the comparative advantage, with an emphasis on exports and technology upgrading.
"Each of the Gulf states has developed long-term strategies, using different combinations of vertical and horizontal diversification. But the region has yet to take advantage of coordinated diversification to leverage each other's strengths and maximize the power and attractiveness of the economic bloc.
"Successful strategies have relied on a policy mix of promoting vertical diversification in "comparative advantage" sectors such as oil and gas and petrochemicals and endeavours into horizontal diversification beyond these sectors with an emphasis on technological upgrade and competition in international markets," it said.
While this "horizontal diversification" away from hydrocarbons is the main common theme behind the large capital spending in GCC countries, there is also "vertical diversification" taking place.
There are two kinds of diversification at farm level: horizontal diversification and vertical diversification.
Contributors describe the dangers and the magnitude of the challenge of converging and connecting illicit networks; the ways and means used by transnational criminal networks and how illicit networks actually operate and interact; how the proliferation, convergence, and horizontal diversification of illicit networks challenge state sovereignty; and how different national and international organizations are fighting back.
Vertical and horizontal diversification can also be opted for the same.
MNCs pursued their Chinese expansion at full speed last year and were active across the spectrum including M&A, joint ventures, research partnerships, geographic and horizontal diversification, new and expanded research operations, manufacturing facility expansion and internal restructuring.

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