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A firm that earns less than 70 percent of the revenue from its dominant business and has direct connections between businesses is engaging in related constrained diversification.
What is diversification?
The technique of allocating capital in finance so as to minimize exposure to any one specific asset or risk is known as diversification. Reducing risk or volatility by investing in a variety of assets is a common strategy for diversification. A diversified portfolio will typically have less volatility than the least volatile of its parts and, in some cases, less volatility than the weighted average volatility of its constituent assets, even if asset values do not move precisely at same time. One of the two main methods for lowering the risk of an investment is diversification. The adage "Don't put all your eggs in one basket" is the most straightforward illustration of diversity. More variety is achieved by putting each egg in a separate basket.
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