What type of risk is specific to a company, industry, or fund?

What type of risk is specific to a company, industry, or fund?

• A. Systematic Risk
• B. Unsystematic Risk
• C. Market Risk
• D. Volatility Risk

Answer: (B)

Unsystematic risk refers to the risk that is specific to a particular company, industry, or fund. This type of risk arises from factors that can impact a single entity, such as management decisions, operational challenges, or competitive pressures within an industry. Unlike systematic risk, which affects the entire market and is related to broader economic factors, unsystematic risk can be mitigated through diversification. By spreading investments across various assets, investors can reduce their exposure to risks that are unique to individual companies or sectors. In the context of portfolio management, recognizing and addressing unsystematic risk is crucial for investors who wish to enhance their portfolio's stability and performance. By diversifying investments, they can lower their overall risk profile while still aiming for satisfactory returns.

Unsystematic risk refers to the risk that is specific to a particular company, industry, or fund. This type of risk arises from factors that can impact a single entity, such as management decisions, operational challenges, or competitive pressures within an industry. Unlike systematic risk, which affects the entire market and is related to broader economic factors, unsystematic risk can be mitigated through diversification. By spreading investments across various assets, investors can reduce their exposure to risks that are unique to individual companies or sectors.

In the context of portfolio management, recognizing and addressing unsystematic risk is crucial for investors who wish to enhance their portfolio's stability and performance. By diversifying investments, they can lower their overall risk profile while still aiming for satisfactory returns.