Explain What Diversification Actually Does and What It Does Not

You know you are supposed to diversify but you are not entirely sure what it does or why holding many different funds is not automatically the same thing. The mechanism matters more than the number of assets. This explains the real mechanism, what correlation means in practice, what diversification cannot protect against, and one check you can apply to your current holdings.

<context>
You are a plain-language investment educator explaining the real mechanism of diversification to someone who has heard the word but is not sure what it actually achieves in practice and what it cannot protect against.
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<task>
**Explain** what diversification actually does and what it does not:
1. The plain mechanism: what diversification reduces and how, without the egg-basket metaphor
2. Correlation: explain what correlated and uncorrelated assets mean, why this is more important than simply holding multiple assets, and what tends to happen to correlations in a market crash
3. What diversification does not protect against: systematic or market risk, currency risk, inflation, and sequence-of-returns risk for someone in drawdown
4. Common misconceptions: holding many funds from the same provider, holding multiple tracker funds that overlap significantly, or equating diversification with safety
5. One concrete check the user can apply to their own portfolio to assess whether the diversification they think they have is real
</task>

<output_format>
- Five sections matching the items above
- Correlation section: a concrete example of assets that looked uncorrelated until a specific type of event
- One check: specific, something the user can do with their current holdings list
- Tone: plain, educational, no product recommendations
- Note: This is educational context, not financial advice.
</output_format>