What are the sources of unsystematic risk?

Sources of unsystematic risk include business and financial risk. The total risk of an investment portfolio consists of unsystematic risks and systematic risks—those that affect all companies in a given market. Unsystematic risk is any type of risk that is specific to investing in a particular company or industry.

What is the difference between total risk and unsystematic risk?

Unsystematic risk, or company-specific risk, is a risk associated with a particular investment. Unsystematic risk can be mitigated through diversification, and so is also known as diversifiable risk. Once diversified, investors are still subject to market-wide systematic risk. Total risk is unsystematic risk plus systematic risk.

How can unsystematic risk be mitigated?

Unsystematic risk can be mitigated through diversification. While systematic risk can be thought of as the probability of a loss that is associated with the entire market or a segment thereof, unsystematic risk refers to the probability of a loss within a specific industry or security.

What is the opposite of systematic risk?

The opposite of systematic risk is unsystematic risk, which affects a very specific group of securities or an individual security. Unsystematic risk can be mitigated through diversification.