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Chapter 2. Evaluating Risk > Portfolio Risk

Portfolio Risk

You can reduce your overall risk by diversifying your investments over a variety of stocks in diverse industries.

The airline and oil industries provide a classic example. Increasing oil prices translate to high profits for the oil industry, but the resulting increases in fuel costs depress airline profits, and hence their stock prices. Conversely, airlines tend to prosper when fuel prices drop, and the oil industry is suffering.


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