Meanings
- uncountablebusinessThe effective reduction of risk of a portfolio, achieved without reduction to expected returns through the combination of assets with low or negative correlations.
1 more example
One reason why banks engage in securitization is to spread around risk like jelly on toast. Instead of lumping the jelly on one small piece of the toast, leaving all the reward (or risk that it falls off the toast) for one bite, it's evenly distributed, making for lots more tasty bites—and, through the quant magic of diversification (spreading the jelly), less risk.
2010, Scott Patterson, The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, Crown Business, →ISBN
Cite this entry
magic of diversification. (n.d.). In WatkinsX Dictionary. Retrieved November 4, 2026, from https://dictionary.watkinsx.com/word/magic%20of%20diversification
“magic of diversification.” WatkinsX Dictionary, https://dictionary.watkinsx.com/word/magic%20of%20diversification. Accessed November 4, 2026.
WatkinsX Dictionary, s.v. “magic of diversification,” accessed November 4, 2026, https://dictionary.watkinsx.com/word/magic%20of%20diversification.
Source: magic of diversification on Wiktionary, CC BY-SA 4.0.