How low can the return go and still have the diversified portfolio earn a higher return than the single-asset portfolio? 

Project on portfolio and cash flows

The return on a diversified portfolio can go lower than the single-asset portfolio as long as it has some assets with higher returns than the single asset. The key is that these assets should be spread across different industries, regions, and asset classes in order to achieve greater diversification benefits. A well-diversified portfolio should encompass a range of investments with different levels of risk and expected return. Therefore, a diversified portfolio could still earn a higher overall return if its individual components have returns that are higher than the single-asset portfolio’s return.