The Law Dictionary

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DIVERSIFICATION Definition & Legal Meaning

Definition & Citations:

A spreading or dispersion of RISK, achievable by combining ASSETS or exposures that are not CORRELATED with one another; the process of diversification helps minimize concentrations of exposure and creates a more balanced set of risks. Ultimately, the risk of a diversified PORTFOLIO depends on the amount of risk that cannot be eliminated, i.e., NONDIVERSIFIABLE RISK, which is often measured by BETA, or the sensitivity of an investment


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