Abstract:
Purpose: This research describes the importance of diversification in a portfolio and by using it
how we minimize the risk of the portfolio.
Methodology/Sample: Inthis research CAPM model used for the calculation of each security
returns and deviation. Secondary data was used for calculation and data took from the KSE-100
index and website of State Bank of Pakistan. Correlation statistic test used and interpret data.
Findings: It was found that economic conditions of country affect the market results. Risk
tolerance, liquidity and entry into market affected the asset allocation in the portfolios. For the
successful investment, it is important that diversified the asset in different asset classes, so
diversified risk could be handled.
