Managers usually deals with these risks SUBJECTIVELY.
Despite the high importance of within risks and beta risks in decision making, managers usually end up dealing subjectively with these risks. This becomes necessary because, in order to measure the diversification effects on risk, the managers need correlation coefficient between a project's return and the returns on the other assets of the company, this requires historical data, which is non existent for the new project. Thus, the managers have to judgmentally consider the situation.
