Specific Risk

Specific risk, also known as unsystematic risk or idiosyncratic risk, refers to the risk associated with an individual asset or company, as opposed to the broader market. This type of risk is unique to a particular company or industry and can be mitigated through diversification. Factors such as management decisions, product recalls, or regulatory changes typically drive specific risk.

Example

An investor in a pharmaceutical company may face specific risk related to the failure of a new drug, which could negatively impact the company’s stock price but not the entire market.