The following are the estimated volatilities and correlations of seven U.S. publicly traded stocks:

		Microsoft	Dell	Delta Air	AA	GM	Ford	Anheuser
	Std.Dev	42%	54%	50%	72%	33%	37%	18%
		Correlations:
Microsoft	42%	1	65%	27%	19%	22%	6%	-7%
Dell	54%	65%	1	19%	18%	32%	32%	10%
Delta Air	50%	27%	19%	1	69%	31%	38%	19%
AA	72%	19%	18%	69%	1	35%	58%	11%
GM	33%	22%	32%	31%	35%	1	64%	11%
Ford	37%	6%	32%	38%	58%	64%	1	10%
Anheuser	18%	-7%	10%	19%	11%	11%	10%	1

1. Using this numerical example, briefly explain why diversifying your portfolio helps reducing portfolio risk and improve your risk-return profile.