Really understanding this is key in making solid investment decisions. For example while your individual investments all carry an individual risk/reward ratio - by mixing it rationally you can ensure that your portfolio risk is lower compared to the individual assets. For example by using assets that have an (somewhat) inverse relationship (negative beta).

Before $BTC alined with the general market due to corporations putting it on their balance sheets, $BTC did had a negative betagainst S&P500. The idea was that if hedge funds would allocate a few % of their portfolio to $BTC they would both pump $BTC to really crazy hights and would improve their own portfolio risk / return ratio (which would be the reason for them to jump in). That big S&P corporations moved before the large hedge funds eleminated that opportunity mostly as we now ride the waves with the market. For now precious metals serves as a somewhat good instrument- but is also decreasing in usefulness (for this purpose) as there is more market demand from the big electonic producers to apply it in their products (and thus again aline the movements with the general market).

I once had a 3 month F&I course on Behavioral Corporate Finance that was mindblowing, for example how Daniel Kahneman and Amos Tversky showed that while rationally we can understand the risk/return ratio, as humans we are hardwires to not make rational choices naturally.