Explain the Relationship Between Correlation, Diversification, and Risk Reduction

question 94

Essay

Explain the relationship between correlation, diversification, and risk reduction.

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Definitions:

Public Good

A product or service that is made available to all members of a society, characterized by being non-excludable and non-rivalrous in consumption.

FM Radio Station

A broadcast station that uses frequency modulation to provide radio programming to the public within a certain geographic area.

Excludable

A feature of a product or service that enables the owner to restrict its use by others without obtaining consent.

Rival In Consumption

Describes a good or service whose consumption by one individual prevents simultaneous consumption by other individuals, making it exclusive in nature.