Why is investing in mutual fund less risky than investing in a particular company's stock

A mutual fund is essentially a company that invests in a lot of stocks and/or bonds. They are more diversified compared to a single corporation. If a company does poorly, then the mutual fund might divest from the company and focus their attention elsewhere. Similarly, if an industry is underperforming, then the mutual fund would turn somewhere else.

The slope of the function is 0.5.