True or false: the benefit of diversification implies that it is possible to find two assets and choose the investment proportions that will result in a portfolio with standard deviation lower than individual standard deviations of either of the assets.

True.

Explanation:

Diversification reduces portfolio volatility and can possibly boost returns.

Stocks - consider investing in companies of different sizes in an array of industries and sectors.

Debt securities - can help mitigate the losses of a bad year of stocks.

Cash - provides immidiate liquidity when you need it.

Why do companies diversify?

For growth in business operations.

To ensure maximum utilization of the existing resources and capabilities.

To escape from unattractive industry environments.

Types of diversification:

Horizontal diversification.

Vertical diversification.

Concentric diversification.

Conglomerate diversification.

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