if my portfolio contains 5 stocks A, B, C, D and E and their returns respectly are 7, -2, 5, -1 and 4 and their S.deviations are 2, 3, 7, 4 and 9
my question is about the diversification ratio, what the is the logic behaind this ratio? if i divide the S.deviation of the portfolio over a S.deviation of one of its security, how i can interpret the result?
for example the S.deviation of the equally portfolio is 5%
so if i take the S.deviation of C stock which is 5, the diversifaction ration = 1, what is the mathimetical logic for the 1?