Unsystematic Risk

Tax Glossary Definition

Unsystematic Risk

Unsystematic Risk – Also called specific risk, diversifiable risk, or residual risk, unsystematic risk is the risk associated with a particular company or industry rather than the overall market. It arises from factors that affect the performance, profitability, or operations of a specific business or sector.

Example: If a tech company faces a sudden product recall, its stock price may drop due to this issue. This risk is specific to the company and can be reduced through diversification in an investment portfolio.

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