Definition ∞ A diversified portfolio consists of a collection of various asset classes, securities, or investment types structured to mitigate risk by spreading investments across different categories. The strategy aims to reduce the impact of poor performance from any single asset by combining assets that react differently to market conditions. This approach typically seeks to achieve more stable returns over time compared to a concentrated investment strategy.
Context ∞ In the digital asset space, discussions about diversified portfolios often involve allocating capital across various cryptocurrencies, stablecoins, and traditional assets to manage volatility. Investors evaluate the correlation between different digital assets and their relationship with conventional markets to optimize risk-adjusted returns. The ongoing challenge is adapting diversification strategies to the rapidly evolving and often interconnected crypto market dynamics.
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