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    Portfolio analysis statements

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    Which one of the following statements is most correct?

    a. Market participants are able to eliminate virtually all market risk if they hold a large diversified portfolio of stocks.
    b. Market participants are able to eliminate virtually all company-specific risk if they hold a large diversified portfolio of stocks.
    c. It is possible to have a situation where the market risk of a single stock is less than that of a well diversified portfolio.
    d. Choices a and c are correct.
    e. Choices b and c are correct.

    Provide which answer is best and why others are not suited.

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    https://brainmass.com/business/financial-statements/portfolio-analysis-statements-10449

    Solution Preview

    Answer: E.
    There are two types of risks:
    1. The systematic (market) risk of a security is the portion of the security's return variance that is explained by market movements.
    2. The unsystematic ...

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