Unsystematic risk, also known as specific risk or diversifiable risk, refers to the risk associated with a specific company, industry, or asset class that is unique and not correlated with the overall market. This type of risk can be mitigated through diversification by spreading investments across different securities or asset classes. Unsystematic risk factors may include company-specific events such as management changes, product recalls, labour strikes, or regulatory issues. By diversifying investments, investors can reduce exposure to unsystematic risk and potentially minimise the impact of adverse events on their overall investment portfolio.
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This glossary post was last updated: 29th March 2024.
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