Because of the effects of diversification, the portfolio's risk is likely to be more than the average of all stocks' standard deviations.
A. The unsystematic risk component of the total portfolio risk can be reduced by adding negatively correlated stocks to the portfolio.
B. A portfolio's risk is likely to be smaller than the average of all stocks' standard deviations, because diversification lowers the portfolio's risk.
C. Portfolio risk will increase if more stocks that are negatively correlated with other stocks are added to the portfolio.
D. Because of the effects of diversifications, the portfolio's risk is likely to be more than the average of all stocks standard deviations
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