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In risk management, the act or strategy of adding more investments 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. This may also reduce the expected return on a portfolio, but it depends on level and type of diversification. There are two main types of diversification. Horizontal diversification involves investing in similar investments. Examples include investing in several technology companies or in different types of bonds. Vertical diversification involves investing in very different securities; for example, one may choose to invest in securities traded in different countries, or in both winter clothing and swimsuit companies. Both types of diversification may be as broad or as narrow as the investor chooses. In general, broader diversification equates to less risk and less return. See also: Markowitz Portfolio Theory.


To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries.
References in periodicals archive ?
Interestingly, GROUP is found to be marginally positively significant (at the 10 percent level) in the ROA model when the modified Herfindahl Index is used to measure diversification.
To validate the results that the relationship between product diversification and firm performance vary by the extent of geographic diversification, we perform separate regressions for geographically diversified firms and geographically focused firms.
The subsample regressions confirm the nonlinear relationship between product diversification and firm performance found in the full sample.
The product diversification measure reported here is based on the modified Herfindahl Index.
Product diversification is found to share a nonlinear relationship with a firm's market value while simultaneously sharing a relationship with the degree to which a firm's operations are geographically diversified.
This article investigates the relationship shared by product diversification and firm financial performance using data drawn from U.
2002) Diversification Benefits from Foreign Real Estate Investment.
1995) Portfolio Diversification Considerations, In Pagliari, J.
1978) Diversification Possibilities in Agricultural Land Investments.
1986) Diversification Categories in Investment Real Estate.
1987) Refining the Analysis of Regional Diversification for Income-Producing Real Estate.
2005) The Return Due to Diversification of Real Estate to the U.

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