Specific (unsystematic) risk is a company (asset)
specific and can be reduced through diversification, due to the covariance
effect of assets moving in opposite directions, leading to a reduction of
volatility compared to the sum of the volatilities of the single assets.

Factors that have an impact on it range from employees’ behaviour to production
issues, profit warnings, and more. From a portfolio management point of view,
the specific risk is diversifiable. Adding more assets to the portfolio reduces
the risk, and virtually eliminates it beyond some level of diversification.

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Financial risk is mainly caused by adverse movement of many factors and can be
classified into various types. Major risk sources include, but are not limited
to, Market Risk, Interest Rate Risk, Credit Risk, Liquidity Risk, Operational
Risk, Currency Risk and Volatility Risk.