Diversification is often called 'the only free lunch in investing.' It is the practice of spreading your capital across various investments to reduce idiosyncratic risk (the risk of a specific company or sector failing).
True diversification goes beyond just holding many stocks—it requires holding assets that do not move in perfect tandem (low correlation). For instance, holding 50 tech stocks provides little diversification if the entire technology sector crashes at once.
By using StressTest.pro, you can view the correlation matrix of your portfolio to ensure you are genuinely diversified across factors, geographies, and asset classes rather than holding redundant positions.