This study analyzes the potential risk-reduction gains from naive
diversification among market advisory services for corn and soybeans. The
total possible decrease in risk through naive diversification is small,
mainly because advisory prices are highly correlated on average. Moreover,
because marginal risk-reduction benefits decrease rapidly with size and the
cost of holding the portfolios increases linearly due to services'
subscription fees, it is optimal to limit portfolio size to a few advisory
programs. Based on certainty equivalent measures and two representative
risk-aversion levels, preferred portfolio sizes are between one and three
programs.