No, but you might hedge a concentrated position, and then the hedged position is easier to borrow against, you then diversify using the borrowed funds. I think a private Exchange is actively managed to do this.
i would say it is an alternative approach to deliver the results of traditional diversification. hedge position will be a position which offsets (negative correlation) risk from your underlying position - that results in some of the benefits gained from diversifying (particularly risk reduction).
No, you are reducing your exposure to a certain factor, could be interest rates, currency, equity markets, whatever.
IMO, you hedge to eliminate a certain risk. Diversification is a form of hedge that protects against unsystematic risk.
My understanding is hedge = remove uncertainty
Diversification seeks to eliminate non-systematic risks leaving only systematic risks exposure. A hedge removes a particular systematic risk.