Why Does Diversification Reduce Risk

question 34

Essay

Why does diversification reduce risk?

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Definitions:

Profitability

A financial metric used to assess a business's ability to generate earnings compared to its expenses and other relevant costs incurred during a specific period of time.

Expensive Milling Machine

A high-cost machine used in manufacturing to shape metal or other materials with high precision.

Constraint

A limitation or restriction that affects the performance or capacity of a process, system, or organization.

Profitability

The ability of a company or product to generate income over cost, leading to profit.