can someone expalain how is this equation derived , like the foundation behind and intuiton so that i can undersatnd it better

Index model and diversification Variance of the equally-weighted portfolio of n firm-specific components: 1 Di=10 n > 0 You are adding up n finite terms and dividing by n2 (i.e., remember variance properties!) As n grows large, the sum goes to zero and firm-specific risk is diversified away