In a diversified, asset allocation strategy, investments that do not
move in tandem do what to the overall risk of the portfolio?

wcp --

The answer to your question is that the "overall risk" of a portfolio
containing investments that "do not move in tandem" is lower than that
of a portfolio where they do not.

For example, common stocks of non-U.S. companies have historically
(although not recently) moved independently as a group in the opposite
direction from U.S. stocks.  When the U.S. stock market dips,
international stock markets often go up because their prices are
affected by different economic and political considerations.  If some
of your stock holdings are rising (international, say) while some are
declining (domestic), your overall risk is lowered.

Here is a reliable online source that makes that point in the same
terms that you have posed in your question:

"An important goal in portfolio selection is to choose a group of
stocks that will work together to minimize risk while maximizing
reward. That means selecting multiple stocks that will not move in
tandem-they should not appreciate or depreciate at the same rate given
various market conditions."

Yahoo: Finance: Investments Test Risk
http://biz.yahoo.com/opt/040609/afd416877ea061a8add635e1926e9184_1.html

You will many more statements of this kind if you peruse the top
results of the following Google search:

"not move in tandem" risk
://www.google.com/search?num=100&hl=en&lr=&ie=UTF-8&q=%22Not+move+in+tandem%22+risk&btnG=Search


Search Strategy:

I knew the answer from my own experience.  In order to make the answer
most responsive to the exact terms you used in your question, I
conducted the above Google search to find statements using your
terminology.

I am confident that the above information is what you are seeking.  If
anything is unclear, Please ask for clarification before rating the
answer.

markj-ga

---

Clarification of Answer by markj-ga on 08 Jul 2004 05:03 PDT

Pardon the important typo in the first sentence of my answer.  That
sentence should read as follows:

"The answer to your question is that the "overall risk" of a portfolio
containing investments that "do not move in tandem" is lower than that
of a portfolio where they do."

You probably need to clarify what it is you want to know.  "Risk" is
hard to quantify and I don't think your question can be answered as
asked.

When things don't move in tandum then some go up and some go down. 
The reason to diversify is that, generally, no one can predict which
investments will go up and which will go down.  You lower your risk by
diversifying; everything you invest in won't go down at the same time,
but on the other hand, they all don't go up either.

wcp --

Thanks much for the five stars and the tip.

markj-ga