Specific Risk

AAA

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."

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  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. Market Risk

    The possibility for an investor to experience losses due to factors ...
  5. Risk

    The chance that an investment's actual return will be different ...
  6. Back-To-Back Deductible

    An insurance policy deductible that is the same as the coverage ...
Related Articles
  1. Bonds & Fixed Income

    The Importance Of Diversification

    Without this risk-reduction technique, your chance of loss will be unnecessarily high.
  2. Options & Futures

    Financial Concepts

    Diversification? Optimal portfolio theory? Read this tutorial and these and other financial concepts will be made clear.
  3. Options & Futures

    Avoid Future Shock By Protecting Your Portfolio With Futures

    Worried about protecting your portfolio of diversified stocks and assets? Using futures with correct strategies can help.
  4. Investing

    How Swaptions Can Reduce Risk in Portfolios

    How can investing in Swaptions reduce risk in portfolios.
  5. Investing Basics

    Understanding Risk Averse Investing

    Risk averse describes a low level of risk an investor is willing to accept on his investments. An investor who is risk averse prefers little risk and is willing to accept a lower return because ...
  6. Investing Basics

    Are You Investing With A Purpose?

    We all appreciate having a wide variety of investing choices, but a random collection of investments does not make an investing plan.
  7. Active Trading Fundamentals

    20 Rules To Trade More Professionally

    Break free from the pack and join the professional minority with an approach that raises your odds for long term prosperity.
  8. Fundamental Analysis

    Is Apple's Stock Over Valued Or Undervalued?

    Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ...
  9. Bonds & Fixed Income

    Figuring Out How To Cover Your Liability Bases

    Whenever we talk about the asset-liability approach to portfolio management (ALM), the concepts of immunization and cash flow matching come into play.
  10. Options & Futures

    How to Use Commodity Futures to Hedge

    Both producers and consumers of commodities can use futures to hedge. We explain, using a few examples, how to achieve commodity hedging with futures.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center