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Diversification and risk

Why one stock can swing far more than a whole market

One company vs. many

A single company can lose most of its value on one bad product, lawsuit or earnings report. An index of 500 companies spreads that risk: one company's bad day is a small part of the whole.

Drawdowns

A drawdown is the fall from a peak to a later low. It's a plain way to see risk: a stock that fell 60% from its high needs to rise 150% to get back to where it was.

Correlation

Holdings that tend to move together give less spread than they seem to. Ten chip makers are, in practice, closer to one bet than ten.

Educational only. Describes ideas and how Coteau shows them; not a forecast and not advice.

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Independent research · Not investment advice · Hypothetical unless marked Live · Data: Yahoo Finance (15-min delayed), SEC EDGAR, House Clerk · Important disclosures · Contact desk@coteau.app

Beta 0.9 · Oct 21, 2026