Specific Risk


DEFINITION of 'Specific Risk'

Risk that affects a very small number of assets. Specific risk, as its name would imply, relates to risks that are very specific to a company or small group of companies. This type of risk would be the opposite of an overall market risk, or systematic risk.

Sometimes referred to as "unsystematic or diversifiable risk."

BREAKING DOWN 'Specific Risk'

An example of specific risk would be news that is specific to either one stock or a small number of stocks, such as a sudden strike by the employees of a company, or a new governmental regulation affecting a particular group of companies. Unlike systematic risk or market risk, specific risk can be diversified away.

  1. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. ...
  2. Systematic Risk

    The risk inherent to the entire market or entire market segment. ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments ...
  4. Risk

    The chance that an investment's actual return will be different ...
  5. Market Risk

    The possibility for an investor to experience losses due to factors ...
  6. Equity Risk Premium

    The excess return that investing in the stock market provides ...
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  1. How does market risk differ from specific risk?

    Market risk and specific risk are two different forms of risk that affect assets. All investment assets can be separated ... Read Full Answer >>
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  4. Can mutual funds invest in hedge funds?

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