I have come across many articles which talk about diversification and have yet to come across one which I feel is truly comprehensive and can cover most aspects of differentiating stocks by certain categories. Many academic articles talk about diversification requiring investing into stocks which are negatively correlated to achieve better risk reward ratios, but how does one actually do it? In this multi-part article, I will attempt to address the different categories and how it affects diversification of risks. Each stock can be categorized into the following manner. 1. Cyclicality of Industry 2. Size 3. Growth Potential / Maturity Level 4. Business Fundamentals 5. Dividend Levels 6. Economic Moats 7. Location of Markets Cyclicality of Industry - Defensive, Cyclical or Counter Cyclical Cyclicality of industry can be classified into mainly defensive, cyclical or counter cyclical. While many people talk about sector rotation as a strategy, that is a ......