Diversifiable risk represents the portion of an asset's risk that can be eliminated by combining assets with less than perfect positive correlation.
A procedure for determining the connections between two variables is referred to as correlation. You discovered that plotting two variables on a "scatter plot" can help you determine whether or not they are generally connected. Correlation is the most widely applied strategy even though there are other measures of association for variables measured at the ordinal or higher level of measurement.
The correlation in statistics examines and quantifies the direction and strength of relationships between variables, hence it quantifies co-variation rather than causality. As a result, we must never assume that correlation implies a cause-and-effect relationship.
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