![]() This distinction should make intuitive sense. By owning stocks in different companies, different industries, and different types of assets and securities, investors can be less affected by an event or decision that has a strong impact on any single asset. This type of risk canbe reduced through diversification. ![]() ![]() Unsystematic risk – also called nonsystematic risk, specific risk, diversifiable risk, or residual risk – is the company- or industry-specific risk that is inherent in each investment. It cannot be mitigated through diversification. This type of risk is both unpredictable and impossible to completely avoid. Systematic risk – also called undiversifiable risk or market risk – is the risk inherent in the overall market and is not specific to a particular stock or industry.
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