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Specific risk definition

A term with many names, a confusing calculation and far-reaching implications for financial risk management.


Specific risk is measure that quantifies volatility associated with the asset in question alone, and is un-correlated with the Market or a group of systematic factors. It is the piece that is left over after removing the systematic risk, or the risk that is perfectly correlated with the Market, or x-variable(s), in a linear regression. It can be computed for any of the three timeframes: historical, expected or forecast.

Synonyms: idiosyncratic risk, idiosyncratic volatility, stock specific risk, diversifiable risk, residual risk, residual volatility

Other Original Content


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In benchmark-relative optimizations specific risk takes on more importance than total risk. | True or False?


In a Sentence

Pat:  I prefer a multi-factor specific risk  as it is slightly more accurate.
Pam:  Yeah, it's a better beta.


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~/ home  / finance  / glossary  / specific risk

specific risk
idiosyncratic risk
idiosyncratic volatility
stock specific risk
diversifiable risk
residual risk
residual volatility
covariance matrix
factor model
risk modeling