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Diversification refers to the _____. a. reduction of the systematic risk of an individual investment, which...

Diversification refers to the _____. a. reduction of the systematic risk of an individual investment, which is measured by its beta coefficient, by combining it with other investments in a portfolio b. reduction of the stand-alone risk of an individual investment, which is measured by its beta coefficient, by combining it with other investments in a portfolio c. reduction of the systematic risk of an individual investment, which is measured by the standard deviation of its returns, by combining it with other investments in a portfolio d. reduction of the unsystematic risk of an individual investment, which is measured by its beta coefficient, by combining it with other investments in a portfolio e. reduction of the stand-alone risk of an individual investment, which is measured by the standard deviation of its returns, by combining it with other investments in a portfolio

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Answer #1
Diversification refers to the reduction of the stand-alone risk of an individual investment, which is measured by the standard deviation of its returns, by combining it with other investments in a portfolio.
Diversification involves minimizing the overall risk of the portfolio by including variety of investments in the portfolio.
The risk of an individual investment is measured by the standard deviation of its returns,is reduced by properly diversifying the portfolio comprising of high risk ,medium risk and low risk securities.
Option E is correct
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