Unsystematic Risk

Unsystematic risk, also known as specific risk or idiosyncratic risk, refers to the risk associated with a specific company or industry. This type of risk can be reduced or eliminated through diversification – by investing in a variety of assets or companies. It is unique to a particular company or industry and can be caused by factors such as changes in management, company operations, consumer demand, labor strikes, or product recall. This contrasts with systematic risk, which affects overall market and cannot be eliminated through diversification.

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