Here are some risks to returns as indicated by the modern portfolio theory:
Systematic risks: Systemic risks, such as inflation, interest rate movements and economic slowdown, affect all assets simultaneously.
Unsystematic risks: These risks are specific to a financial asset but this can be minimized by reducing exposure to it and diversifying the portfolio.
The modern portfolio theory considers that an investor takes the risk of generating lower-than-expected returns from an asset. So, the risk on each asset is a deviation from the average return from the asset. This variance from the expected return will be low if an investor is investing in a portfolio of diverse, uncorrelated financial assets.
For a well-diversified portfolio, the risks (or the average deviation from the mean) associated with each stock does not contribute significantly to the risks on the returns from a portfolio. Rather, the overall portfolio risk is determined by the difference between the levels of risk on the individual assets. So, investors benefit immensely from holding diversified portfolios instead of individual financial assets.