Respuesta :
The portfolio's total risk and dispersion in returns can be seen in the variance. It is calculated using the weights of securities, the correlation or covariance between securities, and the standard deviation of securities.
Option B is correct because the portfolio's overall risk decreases as it is well-diversified, and the portfolio's overall variance may fall below the variance of the least risky portfolio.
Why does portfolio risk decrease with international diversification?
It was discovered that portfolios invested in a mix of three markets performed better than portfolios invested in just one market. As a result, international diversification pushes past the domestic portfolio's efficient frontier, lowering risk and increasing expected return.
Is it true that diversification reduces variance?
The variance of the average of the two variables will be between the two individual variances when one variable has a high variance and the other has a low variance. However, the actual variance of the average will be significantly lower than the arithmetic mean of the variances of the individual variables due to diversification.
Learn more about portfolio's total risk here:
https://brainly.com/question/25031970
#SPJ4
