Question: Which answer is best in explaining what happens to the overall risk in the portfolio if you added 500 securities (rather than 3 securities)? Multiple

Which answer is best in explaining what happens to the overall risk in the portfolio if you added 500 securities (rather than 3 securities)?

Multiple Choice

The covariance in the portfolio goes down and the risk is lower

The correlation increases as you add more securities and the risk is greater

Portfolio risk rises as you add more risky securities

Overall risk diminishes as idiosyncratic risk essentially goes away

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