Investopedia

Continue to Site »

Company Risk

Filed Under » , ,
Dictionary Says

Definition of 'Company Risk'

The financial uncertainty faced by an investor who holds securities in a specific firm. Company risk can be mitigated through diversification; by purchasing securities in additional companies and uncorrelated assets, investors can limit a portfolio's exposure to the ups and downs of a single company's performance.

Company risk is also called "specific risk," "unsystematic risk" or "diversifiable risk."

Investopedia Says

Investopedia explains 'Company Risk'

Systematic risk, on the other hand, refers to the uncertainties associated with investing in the broader market. It cannot be diversified away because it affects all the securities in the market. Major political and economic events such as wars and recessions are examples of events that pose systematic risk. Investors can reduce their exposure to systematic risk through hedging.

Assuming risk is an essential part of achieving investment gains, but the amount of risk undertaken can be managed and customized to each investor's time frame, required rate of return and risk tolerance.

Articles Of Interest

  1.

    How To Outperform The Market

    Active trading is an investing style that aims to beat the market. Find out how it works, and whether it will work for you.

  2. Corporate Bonds: An Introduction To Credit Risk

    Corporate bonds offer higher yields, but it's important to evaluate the extra risk involved before you buy.

  3. Introduction To Investment Diversification

    Reducing risk and increasing returns in your portfolio is all about finding the right balance.

  4. Understanding Volatility Measurements

    How do you choose a fund with an optimal risk-reward combination? We teach you about standard deviation, beta and more!

  5. The Equity-Risk Premium: More Risk For Higher Returns

    Learn how the expected extra return on stocks is measured and why academic studies usually estimate a low premium.

  6. Why It Pays To Be A Lazy Investor

    Be a couch potato! This passive, but diversified, investing strategy could be for you.

  7. Determining Risk And The Risk Pyramid

    Many investors do not understand how to determine the level of risk their individual portfolios should bear.

  8. Behavioral Bias - Cognitive Vs. Emotional Bias In Investing

    We all have biases. The key to better investing is to identify those biases and create rules to minimize their effect.

  9. Why Your Pension Plan Has Sovereign Debt In It

    One type of security pensions tend to invest in is sovereign debt, or debt issued by a government.

  10. Trading Is Timing

    Learn how to make gains even if you don't get in at the right time.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Validation Period

    The amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy.

  2. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

  3. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  4. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  5. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  6. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
Trading Center