magic of diversification
magic of diversification noun: the effective reduction of risk of a portfolio, achieved without reduction to expected returns through the combination of assets with low or negative correlations.
Noun
magic of diversification (uncountable)
- The effective reduction of risk of a portfolio, achieved without reduction to expected returns through the combination of assets with low or negative correlations.
- 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...2010, Scott Patterson, The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, Crown Business, →ISBN
Questions about magic of diversification
- What does magic of diversification mean?
- Magic of diversification means the effective reduction of risk of a portfolio, achieved without reduction to expected returns through the combination of assets with low or negative correlations.
- What part of speech is magic of diversification?
- Magic of diversification is a noun.
Words near magic of diversification in the dictionary
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Adapted from Wiktionary: magic of diversification (page history and authors). Text available under the Creative Commons Attribution-ShareAlike 4.0 license. Word.ws reformatted the entry and added links. Wiktionary data of 2026-09-02.
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