BANKING AFFAIRS

Detailed explanation-1: -Diversification is a risk management technique that mitigates risk by allocating investments across different financial instruments, industries, and several other categories. The purpose of this technique is to maximize returns by investing in different areas that would yield higher and long term returns.

Detailed explanation-2: -For example, stocks tend to rise when bonds are falling and vice versa, so most investors hold both stocks and bonds in their portfolios. Other ways to diversify risk include investing in companies of different sizes, spread across different sectors, and in a variety of geographic regions.

Detailed explanation-3: -Diversification credit is an enterprise risk management term referring to the recognition of the “portfolio effect"-that is, the fact that the economic capital required at the enterprise level will be less than the sum of the capital requirements of the business segments calculated on a stand-alone basis.

Detailed explanation-4: -In finance, diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. A common path towards diversification is to reduce risk or volatility by investing in a variety of assets.