Research note
Diminishing Marginal Risk Reduction
How quickly diversification benefits flatten as holdings are added.
- Status
- Research note
- Version
- Research note
- Date
- 2026
- Authors
- Aryan Patel
Abstract
A bounded study of how portfolio risk changes as holdings are added to an equal-weight portfolio, and where the marginal benefit of further diversification begins to flatten.
Research question
Where does another holding stop meaningfully reducing risk in the defined setup?
Methods
- Equal-weight portfolios
- Holdings-count comparison
- Risk-measure comparison
Data
Public S&P 500 market data covering the study's declared period.
Results
The note reports results for its defined sample, period, construction, and risk measure; it does not present a universal diversification threshold.
Limitations
Results depend on sample selection, market period, portfolio construction, and the chosen risk measure.
- Code availability
- Internal research materials.
- Data availability
- Public market data.
- AI disclosure
- AI-assisted software supported literature retrieval, code generation, analysis, critique, and drafting. Deterministic systems produced and checked estimates. A human researcher retained responsibility for the question, design, interpretation, and release.
- Reproduction status
- Internally reproduced.