You hold a portfolio of 100 stocks with the beta of your portfolio equal to 4.5 . According to CAPM, can you say whether your portfolio is well diversified or not well diversified, using only the information provided in this question? Yes, because the beta of this hedge fund is 4.5 and the beta of the market portfolio is only 1 , so the portfolio is not well diversified. No, the high beta simply means that the portfolio pays a very high return and returns on all stocks can be highly correlated. No, because the beta measures only the systematic risk and this risk cannot be diversified away. Cannot answer this question based on the information provided. Yes, this portfolio is well diversified because it has 100 stocks in it