Unsystematic risk
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Definition
Security-specific risk eliminable through diversification and therefore uncompensated.
Unsystematic risk in plain English
One company's fraud scandal or factory fire can crush that stock while the broad market barely blinks. Unsystematic risk is that security-specific risk eliminable through diversification and therefore uncompensated in standard pricing models. Investors should not expect extra return merely for bearing diversifiable noise. If a stem says markets pay you for single-name risk you could have diversified away, that answer has the compensation story backward.
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