What is Controllable Risk What is Uncontrollable Risk

Controllable risk is the risk that can be controlled. Specifically, under certain conditions, through a series of measures, the risk of prior identification, prediction, and through certain means to prevent and resolve the risk, in order to reduce the likelihood of suffering losses. Uncontrollable risk is not controllable risk. This controllable or not is related to the affordability of each subject.

In the national context we often use diversifiable risk and non-diversifiable risk to describe the degree of control.

Diversifiable risk (also called non-systematic risk) and non-diversifiable risk (also called systematic risk) are classified by the characteristics of each.

I. Characteristics of Diversifiable Risk

1. Diversifiable risk is caused by special factors, such as the management problems of the enterprise, the labor and management problems of listed companies.

2, diversifiable risk only affects the return of certain stocks. It is that part of the risk that is unique to a particular business or industry. For example, real estate industry stocks will plummet when they encounter a downturn in the real estate industry.

3. Diversifiable risk can be reduced by diversification, but it cannot be completely eliminated. Since unsystematic risk is an individual risk, brought about by controllable factors such as individual people, individual companies or individual industries, shareholders can defuse unsystematic risk by diversifying their investments.

The characteristics of non-diversifiable risks

1, non-diversifiable risks are caused by the *** same factors. Economic aspects such as interest rates, the current exchange rate, inflation, macroeconomic policy and monetary policy, energy crisis, economic cycle cycle. Political aspects such as regime change, war and conflict. Social aspects such as institutional change, ownership reform, etc..

2, non-diversifiable risks on the market all stock holders have an impact, only some stocks than some other stocks are more sensitive. For example, basic industries, raw material industries, etc., the systematic risk of their stocks is likely to be higher.