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What is nondiversifiable risk? How is it measured?
If not the returns of one-half the assets in a portfolio are perfectly negatively correlated along with the other half-which is very unlikely- some risk will remain after assets are combined into a portfolio. The degree of risk which remains is non-diversifiable risk, the part of a portfolio's total risk that cannot be eliminated by diversifying.
Nondiversifiable risk is calculated by a term known as beta (β). The ultimate group of diversified assets, the market, has a beta of 1.0. The betas of individual assets and portfolios, relate their returns to those of the whole stock market. Portfolios along with betas higher than 1.0 are comparatively more risky than the market. Portfolios with betas less than 1.0 are comparatively less risky than the market. (Risk-free portfolios have a beta of zero.)
Determine the Limitations of the traditional approach Limitations of the traditional approach were not entirely based on treatment or emphasis of different aspects. In other wo
Does is make any sense to calculate betas against local indexes when a company has a great part of its operations outside this local market? Both the betas calculated against l
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Suggestion regarding Credit limit. Should it be approved or not, what should be the amount of credit limit that electronics give to Booth Plastics.
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