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:
Also Read:
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)
I hope this post is helpful to understand the difference between systematic risk and unsystematic risk and to make comparison between them.
Systematic Risk Vs Unsystematic Risk (Comparison Chart)
Basis For Difference
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Systematic Risk
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Unsystematic Risk
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Introduction
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Uncertainty or portion of risk caused by market fluctuation
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Uncertainty or portion of risk caused by the internal business factors
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Controllable Or Not
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Not controllable
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Controllable
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Impact On
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Whole market
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Only a specific company
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Responsible Factors
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External factors
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Internal factors
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Eradication Method
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Hedging and assets allocation
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Portfolio diversification
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Consequence
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Uncertainty in the economy
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Decrease in business efficiency
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Types
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Interest risk, market risk, purchasing power risk etc.
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Financial and business risk
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I hope this post is helpful to understand the difference between systematic risk and unsystematic risk and to make comparison between them.
