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Diversification

Spitzer, Jonathan ...

Technical Note

Diversification

Spitzer, Jonathan F.

F-1514 | Published November 16, 2006 Technical Note

Collection: Darden School of Business

Product Details

This note outlines portfolio returns and variance calculations for a portfolio of two risky assets. Particular attention is given to developing understanding of the diversification benefit and emphasizing the often misunderstood point that there are diversification benefits even if the returns to the two stocks are positively correlated. The note is designed to be used as a reading to supplement a class where the students implement the equations with real data.

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