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Hedging:
4.
1. Use financial instruments like options and futures to hedge against market risks.
2. For instance, put options can protect against ...
Asset Allocation:
2.
1. Spread investments across different asset classes such as stocks, bonds, and commodities.
2. A balanced portfolio reduces ...
Aspect Systematic Risk Unsystematic Risk
Scope Affects the entire market Affects specific companies/sectors
Diversification Cannot be diversified Ca...
Unsystematic risk can lead to significant losses if an investor’s portfolio is concentrated in a single company or sector. For example, the bankrupt...
1. Broad Impact: Systematic risk impacts all securities in the market, regardless of the industry or company.
2. Non-Diversifiable: Since it is linke...
1. Localized Impact: This risk is specific to a company or sector and does not necessarily affect the broader market.
2. Diversifiable: By holding a ...
Unsystematic risk, or specific risk, is the uncertainty tied to a specific company, sector, or industry. Unlike systematic risk, it does not affect th...
It arises from factors such as economic shifts, political events, global crises, or changes in monetary policy
Systematic risk, often referred to as market risk, is the inherent risk affecting the entire market or a broad segment of the financial system. I
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