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Would you get the largest reduction in risk by spreading your portfolio across two stocks?
Wiki User
∙ 13y ago
Your risk is reduced by investing in stocks with low correlation (prices do not move in sync). This is the basis of modern portfolio theory (look it up at investopedia).
Wiki User
∙ 13y ago
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Diversifying a portfolio of equity securities across sectors and markets will tend to?
Diversifying a portfolio of equity securities across sectors and markets will tend to: 1. a. increase the required risk premium. 2. b. reduce the beta of the portfolio to zero. 3. c. reduce the standard deviation of the portfolio to zero. 4. d. eliminate the market risk. 5. e. reduce the firm-specific risk.
What are the benefits of portfolio investment?
It reduces the risk of uncorrelated assets. So by combing assets that are distinctive from each other it reduces the overall risk.Answer:The biggest benefit of portfolio investment is that it spreads your investment across different types of financial instrument, each with a different risk-return potential. The main reason for this type of diversification is to reduce overall risk that comes from putting all your money in just one type of investment. Many people rely on professional portfolio management services to maximize gains on their investments.
Objectives of portfolio management?
best possible returns based on the market. 1.Maximize Value: Every innovation portfolio is constrained by either human or financial resources. Optimizing the risk-adjusted expected commercial value of the innovation pipeline within those constraints is the primary objective of portfolio management. Making better investment decisions increases returns. 2.Achieve Balance: Portfolios should attempt to balance investments and initiatives across a number of dimensions including both risk and reward, but also across product lines, geographically, by phase and launch date, and by innovation type. There are a number of important analyses that will help portfolio review committees answer questions regarding mix and balance in the pipeline. 3.Maintain Alignment: Innovation portfolios should be congruent with the business and innovation strategies articulated by the organization. This starts with the question of whether the pipeline is capable of delivering against the organic growth goals of the organization. We should also be aligning investment individual business unit or product line objectives.
What do understand by 'Portfolio risk?
One important point about the estimation of standard deviation is the distinction between individual securities and portfolios.Standard deviations for well-diversified portfolios are reasonabily steady across time, and therefore historical calculations may be fairly reliable in projecting the future. Moving from well-diversified portfolios to individual securities, however, makes historical calculations much less reliable. Fortunately, the number one rule of portfolio management is to diversify and hold a portfolio of securities, and the standard deviations of well-diversified portfolio may be more stable.Something very important to remember about standard devitaion is that it is a measure of the total risk of an assset or a portfolio, including, therefore both systamatic and unsystematic risk. It captures the total variability in the assest or portfolio's return, whatever the source of that variability.In summary, the standard deviation of return measures the total risk of one security or the total risk of a portpolio of securities. The historical standard deviation can be calculated for individual securities or portfolios of securities using total returns for some specified period of time.This ex post value is useful in evaluating the total risk for a particular historical period and in estimating the total risk that is expected to prevail over some future period.The portfolio risk is not simply a measure of its weighted average risk. The securities that a contains are associated with each other.The portfolio risk also considers the covariance between the returns of the investment.
What type of a company is JPMorgan Chase?
JPMorgan Chase is a multinational bank providing financial services across a broad spectrum. In the United States it is the largest bank according to its assets.
What is a balanced portfolio?
A balanced portfolio is a diversified investment strategy that aims to manage risk and maximize returns by spreading investments across different asset classes, such as stocks, bonds, and cash equivalents. The goal is to achieve a mix of investments that can withstand market fluctuations and help investors reach their financial objectives.
Who many Enid Blyton Adventure books are there?
The are 800 books across the Blyton portfolio
Diversifying a portfolio of equity securities across sectors and markets will tend to?
Diversifying a portfolio of equity securities across sectors and markets will tend to: 1. a. increase the required risk premium. 2. b. reduce the beta of the portfolio to zero. 3. c. reduce the standard deviation of the portfolio to zero. 4. d. eliminate the market risk. 5. e. reduce the firm-specific risk.
What is the spreading of culture through technology across the world?
diffusion via the Internet
What is an example of a sentence with the word diaspora?
The diaspora was an infection spreading across europe.
What is diversification and why is it important?
Diversification is the practice of spreading investments across various asset classes to reduce risk. By diversifying, investors can protect themselves from the poor performance of a single investment or sector. It is important because it can help to minimize the impact of market fluctuations on a portfolio and improve overall risk-adjusted returns.
In a series circuit why does the largest voltage drop occur across the largest or smallest resistor?
It doesn't. In a series circuit, the largest voltage drop occurs across the largest resistor; the smallest voltage drop occurs across the smallest resistor.
Why does L'oreal Paris have a french name?
Because it is a French company which is spreading across the globe.
How does aerodynamics help a bullet train to go fast?
The reduction of airflow across the surface of the train will help facilitate the train's speed by the reduction of the trains resistance to airflow .
What are the characteristics of diversification?
Diversification involves spreading investments across different assets or securities to reduce risk. By investing in a variety of assets, such as stocks, bonds, and real estate, investors can minimize the impact of any single investment's performance on their overall portfolio. Diversification can help to increase potential returns while lowering overall risk.
What is the force that is caused by the water taken up by these vacuoles?
your mamas asscheeks spreading across the ocean
What did the people call the new religious movement spreading across Arkansas?
The called it the "Great Revival"
