We are often told that diversification is highly beneficial for portfolio performance.
... which is only partly true, as markets are rather highly correlated. Correlation within economic sectors of enterprise stock prices across continents is even higher than the correlation between different sectors of the economy on one single stock market. Correlation between asset classes has proved detrimental during the October 2008 market implosion.
If we are not successful in diversifying away risk, do we at least obtain any excess return?
