When investment returns are less than perfectly positively correlated, the resulting diversification effect means that

• making an investment in two or three large stocks will eliminate all of the unsystematic risk.

• None of the options are correct.

• making an investment in three companies all within the same industry will greatly reduce the systematic risk.

• spreading an investment across many diverse assets will eliminate all of the systematic risk.

• spreading an investment across many diverse assets will eliminate some of the total risk.

• spreading an investment across five diverse companies will not lower the total risk.