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This question is about list of skills.
Systematic risk vs. unsystematic risk
The difference between systematic risk and unsystematic risk is that systematic risk applies to risks that are apparent within an entire market or entire segment of a market, while unsystematic risks apply to risks that are involved with a specific investment opportunity or group of investments and securities.
Systematic risks are also referred to as market risks or non-diversifiable risks. This is because they represent risks to a whole market, a segment of a market, or the economy in general. Examples of systematic risks include macroeconomic events, changes in interest rates, or even a natural disaster that has a profound effect on one market or more markets.
Unsystematic risks do not apply to whole markets, but rather to individual companies. These risks have to do with investments, and they can use diversification to mitigate or take away the risk completely. A company that has a well-diversified portfolio in a number of different markets is able to safeguard against unsystematic risks more effectively.
Key Takeaways:
| Systematic risk | Unsystematic risk |
|---|---|
| Systematic risk applies to risks that are apparent within an entire market or entire segment of a market. | Unsystematic risk applies to risks that are involved with a specific investment opportunity or group of investments and securities. |
| Systematic risks are also referred to as market risks or non-diversifiable risks. | Unsystematic risks do not apply to whole markets, but rather to individual companies and their investments. |
| Examples of systematic risks include macroeconomic events, changes in interest rates, or even a natural disaster that has a profound effect on one market or more markets. | Unsystematic risks relate to internal company financial data and risks inherent in the investment opportunities that they choose to pursue, they do not derive from external sources like systematic risks do. |
| Companies have far less control (if any at times) over systematic risks. | A company that has a well-diversified portfolio in a number of different markets is able to safeguard against unsystematic risks more effectively, and thus have more control over them. |
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