Meaning of magic of diversification | Babel Free
Definitions
The effective reduction of risk of a portfolio, achieved without reduction to expected returns through the combination of assets with low or negative correlations.
Examples
“One reason⟳ why banks engage⟳ in securitization is to spread⟳ around risk⟳ like⟳ jelly on toast. Instead of lumping the jelly on one small piece of the toast, leaving all the reward⟳ (or risk⟳ that it falls off the toast) for one bite⟳, it's evenly distributed, making for lots more tasty bites—and, through the quant magic of diversification (spreading the jelly), less risk⟳.”
CEFR level
C1
Advanced
This word is part of the CEFR C1 vocabulary — advanced level.
This word is part of the CEFR C1 vocabulary — advanced level.
Know this word better than we do? Language is a living thing — help us keep it growing. Collaborate with Babel Free