Portfolio Diversification
Portfolio diversification is spreading capital across instruments, strategies and timeframes whose returns are not perfectly correlated, so that the whole book is steadier than any single component.
Diversification spreads capital across instruments, strategies and timeframes whose returns are not perfectly correlated, so the whole book is steadier than any single component. The benefit is quantified by the covariance math — and undone by its central catch: correlations converge toward one in a crisis, exactly when protection is needed, and ten NSE longs are largely one index bet. Genuine diversification needs different underlying return drivers, monitored live, not surface variety. The full concept — the math, crisis-convergence stress testing and illusory-diversification traps — is maintained at its canonical home on RiskManagementGyan, the network's risk authority.
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Diversification
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Correlation
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Concentration risk
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Published 10 July 2026 · Updated 17 July 2026. This page is a summary; the canonical, maintained treatment of Diversification lives on RiskManagementGyan. Educational content only — not investment advice.