openPR Logo
Press release

Systematic and Unsystematic risk in the Stock market – Explained

There are various kinds of share market risks (stock market liquidity, stock price volatility, legal, inflation, regulatory, and so on) that a person must mitigate in a securities market. However, these risks can be broadly classified into two categories i.e. Systematic risk and Unsystematic risk. Risk can be defined as future uncertainty or deviation of movements which can result in loss/downfall in your investments. You must always measure the risk you, as an investor, are willing to take in order to gain the expected return. There are various tools and parameters which help you minimize the returns and maximize the returns on your portfolio. Let’s discuss the two types of risks and ways to mitigate them.

Unsystematic Risk (Non-market risk):
This type of risk, unsystematic risk, arises from within the company or from the industry in which the company belongs. The good part is that we can minimize unsystematic risk from our portfolio by appropriate risk management.
In order to minimize the risk, we must diversify our portfolio in such a manner which eliminates the risk from any sector or company. The asset diversification is very important; hence, we must choose assets which are negatively co- related to each other.
Let’s take an example – Suppose an investor has invested in an oil company, and he is afraid that the falling oil prices will impact his portfolio tremendously. To mitigate this risk, one should choose a company which will benefit from falling oil prices. The automobile sector or Airline industry seem to gain a positive impact from this forecast. So, you should invest in one of the companies which are like your oil company (in terms of Size, countries of business operation, management style, etc). This kind of diversification and risk-minimizing strategy will help you reduce your risk exposure and stabilize your increasing portfolio growth.

Systematic Risk (Market risk):
This risk type is unpredictable and hence, undiversifiable. This risk affects the overall market and there’s no particular way to mitigate the risk. One of the examples of systematic risk can be the 2008 financial crisis. The source of systematic risk is the market or global factors which cannot be considered beforehand. Derivatives like call/put options do give you creative ways to hedge the portfolio but that is a lesson for some other article!

Thankfully, with the use of appropriate risk metric tools, it is possible to bifurcate systematic and unsystematic risks of any portfolio or stock. To know how to use several risk metrics, consult Hindustan Tradecom at 0141-4069600 or visit our website https://htplonline.com

402/101, Royal World, Sansar Chandra Road,
Jaipur 302001

Established in the year 2005, Hindustan Tradecom Group started its operations with an objective of becoming a financial powerhouse providing a complete range of financial solutions – all under one roof – with dedicated customer service and commitment to providing value for money to the clients.
We are leading share broker, Stockbroker and Commodity broker in Jaipur, Jodhpur, Bikaner, Kota, Rajasthan, India. If you are looking to minimize the risk in the stock market then get in touch with our team at 0141-4069600 or visit our website https://www.htplonline.com

This release was published on openPR.

Permanent link to this press release:

Copy
Please set a link in the press area of your homepage to this press release on openPR. openPR disclaims liability for any content contained in this release.

You can edit or delete your press release Systematic and Unsystematic risk in the Stock market – Explained here

News-ID: 2185332 • Views: 389

More Releases from Hindustan Tradecom Pvt. Ltd.

Launch of HTL Mobile App
Hindustan Tradecom Private Limited, a full service stock broker company based in Jaipur, India, launched its first mobile application in 2019. The application is intuitively designed for investors and traders alike. The company specializes in equity trading, commodity trading, currency derivatives, future & options, IPOs, mutual funds and online Demat account openings. Visit: https://play.google.com/store/apps/details?id=com.protrade.hindustan&hl=en_IN&gl=US to download the Application: Hindustan Tradecom – Apps on Google Play The newly launched mobile application aims
Why should you apply in an IPO? Different ways to apply IPO online in India – …
POs raised a whopping Rs 25000 crores in the year 2020 and gave investors a massive return opportunity. To get listed on the stock exchange the company has to release its IPO. It helps them raise funds from the public by issuing the initial public offerings (IPO) in their company's name. India is one of the ever-growing marketplaces for companies to launch their IPOs. The above statement is