Good diversification requires assets uncorrelated with each other and earning above cash returns
Evidence
Diversification is more than “not putting all your eggs in one basket.” Good diversification seeks to add assets that are uncorrelated or negatively correlated with other assets in a portfolio. Uncorrelated assets still must be expected to earn more than one would expect to get by depositing cash in a checking account, to be worth risking money and inclusion in a portfolio. Moreover, uncorrelated assets do not deliver those returns in a synchronized fashion: they do not have to rise and fall at the same moment in time.
— Mark Blyth, Austerity, 715
Categorization
DEFINE: Defines what genuine portfolio diversification means beyond the cliché — uncorrelated/negatively correlated assets earning above cash.
XREF: connects to: Diversification across geographic mortgage pools created rather than removed correlation. — Mark Blyth, Austerity: The History of a Dangerous…, 97; Portfolio diversification and hedging are the two basic private risk-management techniques — Mark Blyth, Austerity: The History of a Dangerous…, 101; Art valuation now treats artworks as portfolio assets with uncorrelated returns — Ève Chiapello, Financialisation of Valuation, 81 (+2 more)