diversification business definition

The acquisition of a group of assets in which returns on the assets are not directly related over time. An investor seeking diversification for a securities portfolio would purchase securities of firms that are not similarly affected by the same variables. A company can diversify by operating in different industries or having operations in different countries. Proper diversification is intended to reduce the risk inherent in particular products, services, or geographic regions. Diversification is just as important to companies as it is to investors. See also unsystematic risk.