Diversification: A Strategic Approach Towards Risk Mitigation of Select Stocks

Abstract

Diversification is a key concept that provides a calculated method for reducing risk and maximizing profits. Investing across a range of assets in various sectors is the fundamental component of diversification, which lowers the risk exposure to an asset. This paper look into the strategic importance of diversification in select stocks for achieving risk-adjusted returns in investment portfolios. It explores the diversification as a risk management tool and analyzes its impact on the performance of portfolios which comprised of carefully chosen stocks from different sectors. The study utilizes empirical data and quantitative methods such as Capital Asset Pricing Model to evaluate the risk-return factors of diversified portfolios. The findings will provide the benefits of diversification in mitigating risk and suggests the investors in the investment decisions.