The portfolio theory articulates diversification to reduce which of the following risks?

Correct option is C

According to portfolio theory, diversification helps reduce unsystematic risk, which is the risk specific to an individual asset or company. By holding a variety of investments, an investor can offset the losses in one asset with gains in another, reducing the overall risk of the portfolio.
Information Booster:
· Unsystematic risk is specific to a particular company or industry and can be mitigated through diversification.
· Systematic risk (market risk) cannot be eliminated by diversification because it affects the entire market or economy.
· Portfolio theory encourages the use of a mix of different assets (stocks, bonds, etc.) to minimize risk without sacrificing potential returns.
Additional Information:
· Financial risk typically refers to the risk associated with a firm's capital structure or financial management.
· Business risk refers to the inherent risk in the business operations and can be related to production, competition, and market demand.
· Market risk involves factors that affect the entire market, such as interest rates or economic downturns.