Both factors reduce portfolio risk.

1. A large number of assets: Increasing the number of assets in a portfolio helps reduce the idiosyncratic (or unsystematic) risk because the unique risks of individual assets tend to cancel each other out.
2. Low correlations among assets: Low or negative correlation means that the assets do not move in perfect tandem. When one asset performs poorly, another might perform well, smoothing out the overall portfolio returns and thereby reducing the total variance and risk of the portfolio.