Diversification of the risk in a portfolio

Conventional wisdom is to pick 30-40 stocks to be diversified discussed in this WSJ video

But conventionally people mix it with "allocation" (not an asset class allocation but stock type allocation, such as by industries, geographically etc.)
In reality diversification of risk has to do with correlation between stocks in the portfolio. That is something people conventionally forget or do not know at all.

H. Markovitz called diversification a "free lunch".

David Swensen of Yale University giving a 1 hour lecture about "Yale Model", he talks about Asset Allocation, Market Timing and Asset Selection in order to beat the market and generate excess returns.
Currently Yale University has about 23 Billion dollar portfolio.