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Q: Can Systematic risk can be eliminated by diversification?
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What is the diversification of Risk?

Diversification of risk means reduction of risk. Merely reducing risk (and thereby reducing return proportionately) doesn't amount to diversification. Diversification in its true sense represents systematic reduction of risk in such a manner that return per unit of risk increases. By K S JOLLY


What is contrast systematic and unsystematic risk?

Contrast Systematic and Unsystematic risk


What type of risk is avoidable through proper diversification?

portfolio risk


Does standard deviation measure systematic or unsystematic risk?

Standard deviation is a measure of total risk, or both systematic and unsystematic risk. Unsystematic risk can be diversified away, systematic risk cannot and is measured as Beta.


Diversification is an investment strategy to?

Diversification enables the investor to reduce risk by spreading investments among different companies and types of investing.


How does diversification affect financial institions credit risk exposure?

Generally, diversification helps reduce the overall credit risk exposure for financial institutions by reducing their overall expected chargeoff rates.


Distinguish between systematic and unsystematic risks?

It is the risk which is due to the factors which are beyond the control of the people working in the market and that's why risk free rate of return in used to just compensate this type of risk in market. This is the risk other than systematic risk and which is due to the factors which are controllable by the people working in market and market risk premium is used to compensate this type of risk. Total Risk = Systematic risk + Unsystematic Risk


What is the definition of a risk assessment?

A risk assessment is the process of identifying, evaluating, and prioritizing potential risks to an organization, project, or activity. It involves assessing the likelihood and impact of these risks and developing strategies to mitigate or manage them effectively.


What is an example of residual risk?

It is the risk that remains after others have been eliminated.


What Diversification is an investment strategy to?

reduce risk by spreading investments among several assets.


Distingush between systematic and unsystematic risks which is often regarded as the only relevant risk and why?

It is the risk which is due to the factors which are beyond the control of the people working in the market and that's why risk free rate of return in used to just compensate this type of risk in market. This is the risk other than systematic risk and which is due to the factors which are controllable by the people working in market and market risk premium is used to compensate this type of risk. Total Risk = Systematic risk + Unsystematic Risk As systematic risk is beyond the control of people working in market that;s why it is defenately not the relevent risk because anything not controllable is irrelevant and that's why unsystematic risk is the relevant risk because it is in the control of investor to in which security to invest or not.


What are the characteristics of diversification?

Diversification involves spreading investments across different assets or securities to reduce risk. By investing in a variety of assets, such as stocks, bonds, and real estate, investors can minimize the impact of any single investment's performance on their overall portfolio. Diversification can help to increase potential returns while lowering overall risk.