Definition of diversification

In relation to portfolio management, when investors spread risk by holding different classes of assets. In corporate activity, when a company operates in different business areas in an effort to increase sources of income and spread risk.  [1]

Diversification – not putting all your eggs in one basket. The theory says adding risks which are not correlated to each other allows you to add expected return without increasing the risk. The problem is that asset class correlations are not stable.  [2]