2. The relationship between the degree of diversification and portfolio risk In this exercise you will be guided to understand the non-linearity in the benefits of diversification for a varying number of assets in a portfolio. You are a financial advisor and you suggested to your customer that she invests in 50 stocks, because you correctly believe that this is a good number that should be able to provide the benefits of diversification. However, your customer tells you that she has been a very good stock picker, and she is convinced to have found 20 underpriced stocks that will perform particularly well in the not-so-distant future. a Your customer thus asks your opinion about the possibility to eliminate the other 30 stocks from her portfolio, keeping only the 20 that she prefers. Without any computation or other data at your disposal, what would you tell her? What are going to be consequences for her portfolio? 2. The relationship between the degree of diversification and portfolio risk In this exercise you will be guided to understand the non-linearity in the benefits of diversification for a varying number of assets in a portfolio. You are a financial advisor and you suggested to your customer that she invests in 50 stocks, because you correctly believe that this is a good number that should be able to provide the benefits of diversification. However, your customer tells you that she has been a very good stock picker, and she is convinced to have found 20 underpriced stocks that will perform particularly well in the not-so-distant future. a Your customer thus asks your opinion about the possibility to eliminate the other 30 stocks from her portfolio, keeping only the 20 that she prefers. Without any computation or other data at your disposal, what would you tell her? What are going to be consequences for her portfolio