Add names and the wild part washes out. The market part will not budge.
Same kind of stock, equal weight, just more of them. The volatility falls toward a floor it cannot cross. That floor is the market itself, and it is the only risk with a paycheck attached.
| Holding |
Volatility |
Above the floor |
| 1 stock | 40.0 pct | plus 22.0 |
| 5 stocks | 24.1 pct | plus 6.1 |
| 10 stocks | 21.2 pct | plus 3.2 |
| 30 stocks | 19.1 pct | plus 1.1 |
| 50 stocks | 18.7 pct | plus 0.7 |
| The market | 18.0 pct | the floor |
The drop from 40 down to 19 is company risk averaging out, one name's bad quarter cancelling another's good one. It cost nothing in expected return to shed it. The 18 that will not move is the market. That is the risk you are actually paid to hold.