Diversification reduces risk by spreading investments across different asset classes, sectors, geographies, and time periods. It's based on the principle that different assets often move in different directions.
Portfolio Variance = Σ Σ wi × wj × σi × σj × ρij (sum of weighted covariances)
Instead of holding 100% US tech stocks, diversifying into international stocks, bonds, and real estate reduces the impact of any single market downturn on your total portfolio.
AllInvestView shows diversification metrics on your analytics dashboard. See Correlation to understand how assets interact.