3. Systematic risk, also known as "market risk" or "un-diversifiable
risk", is the uncertainty inherent to the entire market or entire market
segment. Also referred to as volatility, systematic risk consists of the
day-to-day fluctuations in a stock's price.
Types of Systematic Risk:
Interest risk
Market risk
Inflation risk
4. Unsystematic risk, also known as "specific risk,"
"diversifiable risk" or "residual risk," is the type of
uncertainty that comes with the company or industry you
invest in. Unsystematic risk can be reduced through
diversification
Types of Unsystematic Risk:
Business risk
Financial risk
5. Systematic risk means the possibility of loss associated with the
whole market or market segment. Unsystematic risk means risk
associated with a particular industry or security.
Systematic risk is uncontrollable whereas the unsystematic risk is
controllable.
Systematic risk arises due to macroeconomic factors. On the other
hand, the unsystematic risk arises due to the micro-economic factors
6. Systematic risk affects a large number of securities in the market.
Conversely, unsystematic risk affects securities of a particular company.
Systematic risk can be eliminated through several ways like hedging,
asset allocation and diversification. As opposed to unsystematic risk that
can be eliminated through portfolio diversification
Systematic risk is divided into three categories, i.e. Interest risk, market
risk and purchasing power risk. Unlike unsystematic risk, which is
divided into two broad category business risk and financial risk.