Does portfolio diversification reduce the variability of returns on individual stocks held in a portfolio?

Yes, portfolio diversification reduces the variability of returns on individual stocks held in a portfolio by spreading investment across a variety of assets. When stocks are combined, the overall risk is lowered because different stocks often react differently to market conditions. This means that while some stocks may perform poorly, others may perform well, balancing out the overall returns. As a result, a well-diversified portfolio can lead to more stable returns over time.