Diversification is the only free lunch of finance, we want to eat it all. "30 names is enough" is really a statement about correlation. Say your names are 0.2 correlated. Thirty of them behave like 4.4 independent bets, and you can keep adding forever without getting past 5. For a book of stocks the lunch does end early, on vol he has a point. The point of the D2 platform is not stock but strategy: diversify different frequencies, assets, mandate, risk level. Screenshot attached: USDC, gold, BTC, HYPE, ETH, global macro and a stock basket on one page, risk from Low to Degen. Get strategy correlation down to 0.05 and that ceiling is 20. Ten of them already count for 6.9. Multi-strats don't stop hiring at pod 30 for the same reason. That 0.05 is what we aim for, and keeping it there when everything dumps together is the actual job. And all of that is just vol. @RoniIsraelov ran random 25-stock portfolios over 1994-2019 (h/t @choffstein). One in ten ended 36% or more below the average. Harry, fade the free lunch at your own risk.
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