sure but when correlations go to 1, you're as badly off as if you only had one position. Diversification engenders false senses of security, and moreover, means

sure but when correlations go to 1, you're as badly off as if you only had one position. Diversification engenders false senses of security, and moreover, means everybody has a bit of everything. Therefore mass panic can ensue causing the correl matrix to ramp. See: 2008. I contend that diversification makes for great maths, but often poor risk management.