How is this portfolio <span title="diversified-Pfizer,Novartis(short),Energy">diversified-Pfizer,Novart...</span> Conversion Devices,Urban Outfitters,GM(short)?

Question

Why 6 months ago-December 31st, would this have been a diversified portfolio? How are they correlated, not numbers but reasons.

I mean, I have two pharmaceuticals, 1 I shorted, 1 I longed, so thats diversification, but what about the rest?

Answer 1

Diversified means having  stocks in several sectors.  You want to add some finacials, consumer staples, oil&amp; gas, food, techinical/computer , health care , utilities to round it out a little more.

Answer 2

&quot;I have two pharmaceuticals, 1 I shorted, 1 I longed, so thats diversification...&quot;

No, that isn&#039;t diversification! Silly goose!

Diversification in finance is risk management by mixing a WIDE VARIETY of investments within a portfolio. Because the fluctuations of a single security have less impact on a diverse portfolio, diversification minimizes the risk from any one investment.

It is not possible to achieve &quot;diversification&quot; by holding five names, unless perhaps they are all broad index ETFs!