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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Moominoid who wrote (82301)	11/25/1998 10:12:00 AM
From: nihil	Read Replies (2) \| Respond to of 176387

re: return and variance directly correlated Of course you are right, got my signs reversed as far as portfolio theory goes. The basic portfolio assumption is that diversification among stocks with low intercorrelations of returns produces a higher expected return than the expected return of any stock with a high variance. My point is that stocks whose prices show high positive first through nth order autocorrelation, i.e. show low S.E. of regression (though not low variance), are nearly sure things (the bigger the n the more sure things are). When a number of stocks show the same growth path (i.e. are intercorrelated e.g. DELL and CSCO) the diversification theory collapses. You would have done better with no more risk from investing in DELL than in a combination of DELL and CSCO (although you might find a few days or week where this is not true. I think a diversified tech portfolio is a poorer investment than picking one two or three winners -- my choice -- the Four Horsemen of the Nasdaq, price change weighted.