A stock’s contribution to the market risk of a well-diversified portfolio is called risk. It can be measured by a metric called the beta coefficient, which calculates the degree to which a stock moves with the movements in the market.

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21-07-2022
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A stock’s contribution to the market risk of a well-diversified portfolio is called risk. It can be measured by a metric called the beta coefficient, which calculates the degree to which a stock moves with the movements in the market.

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tutorconsortium341 tutorconsortium341 · Answer 1 · 2022-08-04T08:29:20+02:00

A stock's contribution to the market risk of a well-diversified portfolio is called relevant risk. It can be measured by a metric called the beta coefficient, which calculates the degree to which a stock moves with the movements in the market.

What is Relevant Risk?

Market-wide systemic risk or Relevant Risk is a given, reflecting the influence of monetary, geopolitical, and economic variables.

Unsystematic risk, which affects a particular sector of the economy or type of security, is distinct from this sort of risk.

Relevant Risk is frequently regarded as being challenging to avoid because it is entirely unpredictable.

By creating a diversified portfolio, investors can partially lessen the effects of Relevant Risk.
Other investment hazards, including industry risk, are driven by systematic risk. It is possible to diversify an investment portfolio by buying a variety of stocks in different industries, such as infrastructure and healthcare, if an investor has focused too much on cybersecurity stocks, for instance.

To learn more about Relevant Risk with the given link

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