@Joachim:
This excellent explanation of dispersion and it's little understood function and high importance in portfolio construction is to be commended. However, in order to provide for some protection of the portfolio from severe crisis declines, low correlation of assets in the short-term is at least as important for diversification and for overall performance in the long-term as high dispersion is in the medium-term. This can be well achieved by alternatives with low correlation, particularly well by pure alpha investments such as market neutral and trend-following Managed Futures strategies from CTAs, which can both go long and short with leverage. The short-term divergence to beta of these uncorrelated pure alpha instruments during severe crises can stabilize the portfolio in the short-term well. In addition, they can also contribute at least as much rebalancing alpha in the long-term due to their mostly high dispersion as beta instruments with high dispersion but high correlation can do.

Therefore, I would consider low correlation at least as important for diversification as high dispersion. Only if both are utilized in a balanced way, the portfolio can be sufficiently stabilized over all relevant time periods. And a higher possible risk-adjusted excess return, compared to the proper benchmark index, can be achieved in the long-term at the same time.

It makes no sense to me to mainly manage rather benign medium-term risks by focussing on assets with high dispersion, but paying less attention to actually much more severe tail risks, where a similar allocation to assets with appropriately low correlations would be very beneficial for both short-term risk and long-term return. Particularly, the highest short-term risk with devastating long-term consequences for clients, leaving the supposedly sinking ship near the bottom of an unexpectedly severe crisis due to panic, if their portfolio values decline more than tolerated due to insufficient crisis protection and/or due to usually overestimated risk tolerances, would then be neglected!

These severe short-term risks can and should be appropriately reduced and pure alpha returns harvested with at least the same effort as other longer term risks and returns by sufficient diversification through a balanced allocation of assets with low correlation as well as with high dispersion, respectively. Similarly, excellent enterprises pay at least equal attention to surviving in the short-term as well as to growing more then their industry benchmarks in the long-term by balancing all their risks from short- to long-term with best practices in order to assure a sustainable development.