Nonsystematic risk

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Nonsystematic risk

Nonmarket or firm-specific risk factors that can be eliminated by diversification. Also called unique risk or diversifiable risk. Systematic risk refers to risk factors common to the entire economy.

Nonsystematic Risk

Risk that is unique to a certain asset or company. An example of nonsystematic risk is the possibility of poor earnings or a strike amongst a company's employees. One may mitigate nonsystematic risk by buying different of securities in the same industry and/or by buying in different industries. For example, a particular oil company has the diversifiable risk that it may drill little or no oil in a given year. An investor may mitigate this risk by investing in several different oil companies as well as in companies having nothing to do with oil. Nonsystematic risk is also called diversifiable risk. See also: Undiversifiable risk.

Nonsystematic risk.

Nonsystematic risk results from unpredictable factors, such as poor management decisions, successful competitive products, or suddenly obsolete technologies that may affect the securities issued by a particular company or group of similar companies.

Portfolio diversification, which means spreading your investment among a number of asset subclasses and individual issuers within those subclasses, can help counter nonsystematic risk.

References in periodicals archive ?
Contract notice: Of safety coordination tasks and protection of the health of category 2 or category 3 with particular risks when working on feeder fiber networks in the municipalities of the haute-savoie.
SPS Missions Category 2 or Category 3 with particular risks.
Guns pose particular risks to women and children that state and local lawmakers might reasonably seek to address through gun control legislation.
Handguns pose particular risk to women and children, and the research suggests that the statutes challenged in this case may prevent a substantial number of firearm deaths and injuries.
Particular risks can be accepted or rejected, but not influenced in any fundamental way, and the successful insurer is able to measure these risks and price them appropriately.
In addition, investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including litigation exposures.
Businesses that have Internet exposures should assess the particular risks posed by their business and evaluate whether their existing coverage is adequate.
Since everybody sees the same information, offices that are scoring greens in mitigating particular risks can share their ideas with less successful offices, Spielmann said.
Particular risks may be elevated during periods in which the Fund's investment strategy dictates higher levels of investment in particular types of stocks.
The emergence of countries such as China and India as suitable destinations for drug discovery outsourcing is creating new opportunities for foreign pharma and biotech companies to achieve cost savings as well as increase their overall R&D productivity, but companies must still proceed cautiously, as there are particular risks in these countries.