Diversification is the idea of not putting all your eggs in one basket. Sending Little Red Riding Hood alone to Grandma's house with 12 eggs in one basket is risky. Grandma's chance of going hungry is high. If Little Red Riding Hood's mother wants to make sure that Grandma receives her eggs, she should send 12 Little Red Riding Hoods - not just one. By sending 12 Little Red Riding Hoods, if one Little Red is caught and eaten, only one of the eggs is lost, and the other 11 will arrive safely. Grandma will barely notice that she received only 11 eggs instead of 12. In another scenario, Mama may decide that 6 Little Red Riding Hoods will do the trick.
In the stock market, this is called a "concentrated" strategy, and it happens to be the strategy followed by Warren Buffett as well as by Emperor. Diversifying your investments allows for a decrease in overall volatility. If one of your stocks falls in value, you will still have several others that may remain stable, or even rise in value.