Difference Between Systematic And Unsystematic Risk

Difference Between Systematic Risk And Unsystematic Risk

The main dissimilarities or differences between systematic and unsystematic risk can be pointed out as follows:

1. Definition

Systematic Rick: It is the portion of risk or uncertainty caused by the fluctuation in the market or economy

Unsystematic Risk: It is the portion of risk or uncertainty associated with the internal factors of the business firm

2. Control

Systematic Risk: It cannot be controlled because it arises due to the factors outside the organization

Unsystematic Risk: It can be controlled because it arises due to the internal factors

3. Impact/Affect

Systematic Risk: Whole security market is affected by this form of risk

Unsystematic Risk: Only a certain company is affected

4. Responsible Factors

Systematic Risk: External or macroeconomics factors are responsible

Unsystematic Risk: Internal or microeconomics factors are responsible

5. Eradication

Systematic Risk: Through hedging and allocation of assets

Unsystematic Risk: Through diversification of portfolio

   Also Read: 

Difference Between Risk And Uncertainty

6. Consequence

Systematic Risk: It creates economic uncertainty

Unsystematic Risk: It decreases business efficiency

7. Types

Systematic Risk: It can be classified into purchasing power risk, market risk and interest risk

Unsystematic Risk: It can be classified into financial risk and business risk

Systematic Risk Vs Unsystematic Risk (Comparison Chart)

Basis For Difference	Systematic Risk	Unsystematic Risk
Introduction	Uncertainty or portion of risk caused by market fluctuation	Uncertainty or portion of risk caused by the internal business factors
Controllable Or Not	Not controllable	Controllable
Impact On	Whole market	Only a specific company
Responsible Factors	External factors	Internal factors
Eradication Method	Hedging and assets allocation	Portfolio diversification
Consequence	Uncertainty in the economy	Decrease in business efficiency
Types	Interest risk, market risk, purchasing power risk etc.	Financial and business risk

I hope this post is helpful to understand the difference between systematic risk and unsystematic risk and to make comparison between them.