medium · Quantitative Finance qf-core
A portfolio manager holds a large number of assets, each with a variance of σ^2 and an identical pairwise correlation of ρ.
As the number of assets n approaches infinity, what happens to the total portfolio variance?
- It converges to (σ^2)/(n).
- It converges to zero.
- It converges to ρ σ^2.
- It remains at σ^2.
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