Risk Reduction with Diversification
Components of Risk
Market or systematic risk: risk related to the macro economic factor or market index
Unsystematic or firm specific risk:  risk not related to the macro factor or market index
Total risk = Systematic + Unsystematic
Two-Security Portfolios with Different Correlations
Portfolio Risk/Return, Correlation Effects
Relationship depends on correlation coefficient
-1.0 <  < +1.0
The smaller the correlation, the greater the risk reduction potential
If= +1.0, no risk reduction is possible

Content
What is project portfolio management

Portfolio Management is the project selection process and involves identifying opportunities: assessing the organizational fit; analyzing the costs, benefits, and risks; and developing and selecting a portfolio.
The art of project portfolio management is: doing the right thing, selecting the right mix of projects and adjusting as time evolves and circumstances unfold.
Portfolio Management is:
Defining goals and objectives – clearly articulate what the portfolio is expected to achieve
Understanding, accelerating, and making tradeoffs – determine how much to invest in one thing as opposed to something else
Identifying, eliminating,minimizing, and diversifying risk – select a mix of investments that will avoid undue risk, will not exceed acceptable risk tolerance levels, and will spread risks across projects and initiatives to minimize adverse impacts
Monitoring portfolio performance – understand the progress that the portfolio is making toward the achievement of the goals and objectives
Achieving a desired objective – have the confidence that the desired outcome will likely be achieved given the aggregate of investments that are made